Hostile Takeover Defenses: What You Need to Know
Mergers and acquisitions are complicated on their own. However, when your company is targeted by way of an unsolicited bid, things can get tense. The fact that your board has turned down an offer is just the initial step. You need to know how to defend against the possibility of a hostile takeover.
More than likely, you understand the premise of a hostile takeover. Your company may have no interest in changing leadership. Yet, the bidder continues to go after you. They seem intent on acquiring your company. Meanwhile, you should know that some of your defenses may already exist as a means of prevention.
Preventive Hostile Takeover Defenses
You may realize that some hostile takeovers are directly related to stock purchases. The bidder may pick up a number of shares on the open market before making an offer. Likewise, a proxy fight may ensue seeking to replace management by way of a simple majority vote.
As a means of protection, it is important to evaluate trading patterns. Additionally, companies should have a plan in place to monitor shareholders. These types of analyzes often set off warning bells when examined closely.
Shareholders and Hostile Takeover Defenses
The importance of a well-drafted shareholder’s agreement is often critical when defending against a hostile takeover. In particular, the shareholder’s rights plan is known as the “poison pill” when it comes to companies fighting against the acquisition.
The shareholder’s rights plan allows existing shareholders to add to them into the company. They will also be permitted to make the purchases at a discounted price. By doing so, the existing shareholders gain more collective power.
There’s a good chance that the bidder has already tried to pick up stock interests. However, the cost will be higher to the prospective buyer. Meanwhile, the risk of the poison pill approach is that it could discourage other investors.
Killer Bees and Hostile Takeovers
First, there’s the defense via the poison pill. But, killer bees? It almost sounds as though defending against a hostile takeover is something out of a work of fiction. In reality, killer bees are individuals or companies that ward off the unwanted bids.
For example, a law firm with experience is combatting hostile takeovers would be one of your company’s killer bees. They will work out a strategy with others fighting against the unwanted bid and acquisition. This includes accountants, investment bankers, and tax experts.
These are just some examples of how your company can fight unsolicited bids that could result in a hostile takeover. Have questions? The Law Offices of Manfred Sternberg and Associates can assist you. Give us a call!