Over the past two decades, the tech industry has not experienced an inordinate number of hostile takeover attempts. That`s partly because, as the CNET article notes, the value of tech companies is often tied to the expertise of their employees. As this month has shown, hostile takeovers typically don`t have a positive social impact on the target company`s workforce. The distraction and persistent uncertainty of hostile action could lead to a flight of talent to the upper and middle levels. A company may resort to a hostile takeover if the management of the target company is not open to takeover bids. There are two main strategies a company uses to carry out a hostile takeover: a takeover bid and a proxy fight. Individual shareholders then submit their votes to the share transfer agent or brokerage responsible for aggregating the information. The information is then presented to the Secretary General of the target company before the Annual General Meeting. In most cases, the acquirer obtains majority control of the target company within a month or less if shareholders accept the offer and vote in favor of the acquisition at the annual general meeting. A hostile offer and a friendly offer differ in terms of the approach used by the acquiring company to acquire the target company. In the case of a friendly offer, the acquirer and the target company work together to negotiate favorable terms for the agreement. Shareholders had until December 2010 to accept Sanofi`s offer. As many analysts had predicted, the majority of shareholders considered Sanofi`s offer to be weak and the offer was unsuccessful.
A company may attempt a hostile offer to acquire another company for a variety of reasons. Often associated with hostile takeovers, takeover bids are publicly announced (i.e., by public solicitation) to take control of a company without the consent of its management team and board of directors. If the board of directors of a target company facing a hostile takeover is strategically organized into a multi-level board of directors, each board member is divided into different categories according to their mandate. The high failure rate is not the only deterrent to hostile takeovers. Other potential pitfalls include the impact on the hostile bidder`s negotiating history and significant expenses for the acquirer in the form of consulting and compliance fees. A famous example of a takeover bid took place in 2010 when French biotech company Sanofi-Aventis proposed to buy the American biotech company Genzyme. Genzyme`s management declined, so Sanofi made its offer directly to shareholders. The acquisition was completed in 2011.
On the other hand, a hostile takeover bid consists of an offer made directly to shareholders, effectively bypassing the board of directors. There are many examples of hostile takeovers in the real world. A takeover bid occurs when the hostile bidder bypasses the management of the company and offers to buy shares directly from shareholders, usually for more than their current market value. Each shareholder decides himself whether or not to sell his stake in the company. The bidder`s goal is to buy enough shares to hold a majority stake in the company. Takeover bids are regulated by the Securities and Exchange Commission (SEC). A popular poison pill provides for the resignation of key personnel in the event of a hostile takeover, while the Pac-Man defense aggressively allows the target company to buy shares of the company attempting the takeover. If a company, investor or group of investors makes a public offer to purchase the shares of another company at a premium greater than the current market value, the board of directors may reject the offer. The acquiring company may forward this offer directly to the shareholders, who may accept it if it has a sufficient premium to the market value or if they are not satisfied with the current management.
The sale of the shares will only take place if a sufficient number of shareholders, usually a majority, accept the offer. The Williams Act of 1968 regulates takeover bids and requires disclosure of cash takeover bids. In fact, the board of directors can even take the measures deemed appropriate to block the hostile takeover. A hostile takeover can be a difficult and time-consuming process, and attempts often end without success. In 2011, for example, billionaire activist investor Carl Icahn attempted three separate bids to acquire homeware giant Clorox, which rejected each of them and introduced a new shareholder rights plan to defend it. Clorox`s board even ousted Icahn`s proxy fighting efforts, and the attempt eventually ended within months without a takeover. An example of a successful hostile acquisition is the acquisition of Genzyme Corp. by pharmaceutical company Sanofi-Aventis (SNY).