A takeover is a type of corporate action where a company acquires control over another firm. This is done by purchasing a majority stake in the target company’s outstanding shares. The acquiring company can then make decisions about the acquired company’s business operations, including changes to the board of directors or the company’s overall direction. The buyout might be friendly, where the target company consents to the purchase, or hostile, where the purchasing company goes directly to the shareholders or fights to replace the management in order to gain control.
1. What is the difference between a merger and a takeover?
In a merger, two companies decide to combine and operate as one new company. Both companies’ shareholders must approve the merger. In a takeover, one company acquires another without forming a new company. The acquiring company buys the majority of the shares and takes control of the other company.
2. What is a friendly takeover?
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A friendly takeover is when the management and board of directors of the target company approve of the acquisition. The acquiring company negotiates terms with the target company’s management.
3. What is a hostile takeover?
A hostile takeover is when the acquiring company purchases a majority of the target company’s shares without the consent of the target company’s management. This is typically done by making a public tender offer directly to the target company’s shareholders.
4. What is a takeover bid?
A takeover bid is an offer made by one company to purchase the shares of another company. It specifies the number of shares to be bought and the price offered per share. It’s a common method used in takeovers.
5. What is a leveraged takeover?
A leveraged takeover, also commonly known as a leveraged buyout (LBO), involves the acquiring company using borrowed funds or debt to purchase the majority of the target company’s shares. The assets of the acquired company are often used as collateral for the debt.