Hostile Takeover



When an acquirer company takeovers a target company by going directly to the latter’s shareholders or fighting back till the management is replaced to get the acquisition approved is called as a hostile takeover. It can be accomplished with a tender offer or through a proxy fight.
Hostile takeover’s key characteristic is that the management of a target company does not want this deal to go through. At times, company’s management would defend against such unwanted takeovers by using controversial strategies like poison pill, golden parachute, crown-jewel defense or the Pac-Man defense.
A company can protect themselves from hostile takeovers by establishing stocks with differential voting rights (DVR). Or else, they can establish an employee stock ownership program (ESOP), a tax-qualified plan where the employees own substantial interest in the company.
For example, in 2011, billionaire activist investor Carl Icahn tried to acquire household goods giant Clorox by attempting three separate bids. The Clorox board sidelined Icahn’s proxy fight efforts and unfortunately his efforts did not become successful, ending in a few months without a takeover.


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