HOSTILE TAKEOVERS Meaning and
Definition
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Hostile takeovers refer to the acquisition of a company by an acquiring entity or group, against the wishes and resistance of the target company's management or board of directors. It is a transaction that occurs when the acquiring party directly approaches the shareholders of the target company and bypasses the management's consent. The intention is to gain control over the company by obtaining a majority stake or a controlling interest.
In a hostile takeover, the acquiring entity typically offers higher prices for the target company's shares, often in an attempt to convince its shareholders to sell their holdings. These offers may be made directly to shareholders or through a tender offer, where the acquiring company offers a premium price to buy their shares. The hostile acquirer may also actively seek to replace the target company's board of directors to facilitate the acquisition process.
This type of takeover is considered "hostile" as it occurs without the consent or cooperation of the target company's management. It often involves a contentious or hostile relationship between the acquiring party and the targeted entity, as their objectives and strategies may not align. These takeovers can be strategically motivated, with the acquiring party seeking to gain access to valuable assets, eliminate competitors, or enhance its market position.
Hostile takeovers have legal and regulatory implications, and in some jurisdictions, there are specific regulations and defenses in place to protect companies from being taken over against their will. These defenses may include poison pills, shareholder rights plans, or measures that require super-majority shareholder approval for certain transactions.
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Etymology of HOSTILE TAKEOVERS
The term "hostile takeovers" originated in the field of corporate mergers and acquisitions in the mid-20th century. Here is the breakdown of its etymology:
1. Hostile: The word "hostile" comes from the Latin word "hostilis", which means "of an enemy" or "belonging to the enemy". Over time, it came to mean "unfriendly" or "opposed in feeling, action, or character".
2. Takeover: The word "takeover" refers to the act of taking control or acquiring something, often used in the context of gaining control of a company. It is a compound word consisting of "take" and "over", where "take" means "to possess or capture" and "over" implies gaining authority or control.
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