The Ins and Outs of Hostile Takeovers: Understanding the Process and Historical Examples

A hostile takeover occurs when one company attempts to acquire another company without the consent of the target company's board of directors. Hostile takeovers can be a controversial and complex process, but they can also be a valuable tool for companies looking to expand their operations and increase their market share.

The first step in a hostile takeover is for the acquiring company to make a public offer to purchase shares of the target company at a premium price. This offer is usually made through a tender offer, which is a public offer to purchase a certain number of shares at a specific price. The acquiring company may also make a conditional offer, which is an offer that is contingent on certain conditions being met, such as regulatory approval or a certain percentage of shares being tendered.

Once the initial offer is made, the target company's board of directors will typically respond by either accepting the offer or rejecting it. If the offer is rejected, the acquiring company may then proceed with a proxy fight, which is a campaign to gain control of the target company's board of directors through the election of new board members. This is done by soliciting proxies, which are votes that are cast by shareholders on behalf of the acquiring company.

If the acquiring company is successful in gaining control of the target company's board of directors, it can then proceed with the merger or acquisition. The target company's shareholders will then vote on the proposed merger or acquisition, and if a majority of shareholders approve, the deal will be completed.

Historical Examples of Hostile Takeovers:

• In 1985, T. Boone Pickens and his investment group attempted a hostile takeover of Gulf Oil, but were ultimately unsuccessful.
• In 1988, RJR Nabisco was the target of a highly publicized hostile takeover bid by Kohlberg Kravis Roberts & Co. The deal, valued at $25 billion, was the largest leveraged buyout in history at the time.
• In 1998, Bank of America launched a hostile takeover bid for NationsBank, which ultimately resulted in the merger of the two companies.
• In 2008, Yahoo rejected a $47.5 billion hostile takeover bid from Microsoft.
• In 2018, 21st Century Fox accepted a $71.3 billion hostile takeover bid from the Walt Disney Company.

It's important to note that, while a hostile takeover can be a quick way for a company to acquire another company, it can also be a risky and expensive process. Both the acquiring and target companies may face significant financial and legal challenges, and the process can also be highly disruptive to employees and other stakeholders. Additionally, the process of a hostile takeover can also be detrimental to shareholders of the target company as the acquiring company may pay a premium price for control and the target company shareholders may receive less than the company is worth.

In conclusion, a hostile takeover is a complex process that can be a valuable tool for companies looking to expand their operations and increase their market share. However, it can also be a risky and expensive process, and it is important for companies to carefully consider the potential benefits and drawbacks before proceeding with a hostile takeover.