Takeover implies acquisition of ownership of a company which is already registered through the purchase or exchange of shares. Takeover usually takes place either by way of acquisition or purchase wherein the Acquirer acquires shares or voting rights or control in the Target Company or where the Acquirer acquires assets of the Target company.

In India, Takeovers of Unlisted Companies are governed by Sections 235 and 236 of Companies Act, 2013 (‘the Act’) whereas Takeovers of Listed Companies are governed by the aforesaid provisions along with Securities Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulation, 2011 (‘the Takeover Code’).

Few Important Definitions:

1. ‘Acquirer’ means any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or through, or with persons acting in concert with him, shares or voting rights in, or control over a target company.

2. ‘Control’ as defined under section 2(27) of the Companies Act, 2013 (‘’the Act”) shall be exercised in the following manner:

a. by appointing the majority of the directors; or

b. by controlling the management or policy decisions exercisable by a person or persons acting individually or in concert whether directly or indirectly; or

c. by virtue of its shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

Note: The words ‘in any other manner’ are not defined under the Act. Hence the same can be interpreted as per the mutual consensus arrived between the Acquirer and the Target Company.

3. ‘Target company’ means a company and includes a body corporate or corporation established under a Central legislation, State legislation or Provincial legislation for the time being in force, whose shares may or may not be listed on a stock exchange;

Types of Takeover:

Takeovers are broadly classified into three categories:

1. Friendly or Negotiated Takeover – A friendly takeover is a scenario in which a target company is willingly acquired by another company. Friendly takeovers are subject to approval by the target company’s shareholders, who generally greenlight deals only if they believe the price per share offer is reasonable.

2. Hostile Takeover – A hostile takeover is a scenario in which a target company is unwillingly acquired by another company. Hostile Takeover are those where the prospective investor unilaterally acquires shares without the knowledge of target company to be a dominant market leader.

3. Bail Out Takeover – A bailout takeover refers to a scenario wherein the Government or a financially rich/stable company takeover financially sick companies in order to extend help and to turnaround the latter.

Defense Strategies to fend off hostile takeover:

Mentioned below are few defense strategies that can help fend off a hostile takeover:


  • A white knight is a hostile takeover defense whereby a ‘friendly’ individual or company acquires a company/corporation at fair consideration that is on the verge of being taken over by an ‘unfriendly’ bidder or acquirer, who is known as the black knight.
  • Although the target company does not remain independent, acquisition by a white knight is still preferred as compared to a hostile takeover.
  • Unlike a hostile takeover, current management typically remains in place in a white knight scenario, and investors receive better compensation for their shares.


  • The Pac-Man defense is a defensive business strategy used to stave off a hostile takeover, in which a company that is threatened with a hostile takeover “turns the tables” by attempting to acquire its would-be buyer. Further, the Pac-Man defense is an expensive strategy that may increase debts for the target company which in turn may result in losses or lower dividends in future years.


  • A staggered board of directors is a practice in which groups of directors are elected at different times for multiyear terms. In the presence of a staggered board, a hostile bidder must wait several years to entirely replace the board with one of its own choosing, particularly because it must win proxy fights at successive shareholder meetings.


  • A Golden parachute consists of substantial benefits given to top executives if the company is taken over by another company and the executives are terminated as a result of the takeover.
  • Golden parachute clauses are present in the employment contracts as any other employment related clauses.
  • These clauses result in a hefty pay to the executives in the event of termination of their jobs resulting out of a hostile takeover.
  • Such a strategy makes it less lucrative for the predator to continue with the acquisition.


  • This is the most popular and effective defense to combat the hostile takeovers. Using this method the target company gives existing shareholders the right to buy stock at a price lower than the prevailing market price if a hostile acquirer purchases more than a predetermined amount of the target company’s stock.
  • The purpose of this move is to devalue the stock worth of the target company and dilute the percentage of the target company equity owned by the hostile acquirer to an extent that makes any further acquisition prohibitively expensive for the predator.


  • An Indian version of Poisson Pill is devised by the Indian conglomerate Tata’s which is often referred to as ‘Brand Pill’.
  • Tata group companies have a brand licensing agreement with the holding company and owner of Tata brand, the Tata Sons whereby any hostile (or otherwise) acquirer of any of the Tata entities is not permitted to make use of the established Tata brand name. Consequently, the bidder in a hostile takeover has to change the name of the company immediately after the takeover thereby losing the much-valued brand name which may in turn result in loss of valuation.


  • Crown Jewel is a Defense strategy wherein the target company of a hostile takeover resorts to selling its most valuable assets in order to reduce its attractiveness to the hostile bidder.
  • The crown jewel defense is always considered the last-resort defense since the target company will be intentionally destroying part of its value, with the hope that the acquirer drops its hostile bid.
  • It is popularly referred to as a Self-Destructive Strategy.

Note: Apart from the strategies mentioned aforesaid, buyback of shares may also be considered as an effective strategy to fend off hostile takeover.

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May 2021