The word takeover is been coined its significance through competitive pressure and an increasing growth across geographies and industries. Takeover is an inorganic corporate restructuring strategy which is been adopted by business houses, enterprises now a days to address future challenges and survive in the competitive world. Through takeover one company acquires control over another company, usually by purchasing all or a majority of its shares. Takeover implies acquisition of control of a company, which is already registered, through the purchase or exchange of shares. Takeovers usually take place when shares are acquired or purchased from the shareholders of a company at a specified price to the extent of at least controlling interest in order to gain control of that company. The takeover strategy has been adopted by business houses to achieve corporate value, achieve better productivity and profitability by optimum use of resources, men, materials and machines.
OBJECT AND ADVANTAGES OF TAKEOVER-
1. To improve productivity and profitability by joint efforts of two undertaking.
2. To effect saving in overhead.
3. To achieve economies of scale.
4. To create shareholder value and wealth by optimum utilization of resources.
5. To increase market share.
6. To diversify the business of the company.
7. Greater profitability and more investment.
KINDS OF TAKEOVER-
1. Friendly Takeover-Friendly Takeover is done with the mutual consent of Target Company. In friendly takeover the takeover will be completed through negotiations and the takeover bid may be with the consent of all of the shareholders of Target Company. Basically a friendly takeover occurs when the board of directors and the shareholders of the company approve the acquisition of Target Company. Example-Facebook takeover to WhatsApp is big example of a friendly takeover where Facebook bought WhatsApp.
2. Hostile Takeover-A Hostile Takeover occurs without the consent of Target Company and the management. When the acquirer silently and unilaterally takes control over the target company against the wishes of the existing management it is hostile takeover. Example-Acqusition of Mind Tree by Larsen & Turbo.
3. Bail out Takeover-Bail out takeover occurs when the profit earning company takes control over the financially sick company to bail out the former is called bail out takeover. The price of this takeover would be very attractive as creditors are mostly banks and financial institutions. The goal of this takeover is to regain financial strength, to survive in the competitive world. Example-National City Corporation was acquired by PNC Financial Services.
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