Hostile Takeover Bid
What it is:
A hostile takeover bid is a type ofor that is made against the wishes of the board (and usually management) of the target company.
How it works (Example):
In a hostile takeover bid situation, the target company's board of directors rejects the , but the bidder continues to pursue the .
A hostile bidder often makes its bid via a
Why it Matters:
Most acquisitions and mergers occur in the business world by mutual agreement -- both sides agree that all of the shareholder's interests are served best by the transaction. In those instances, both sides have a chance to evaluate the costs and benefits, assets and liabilities, and proceed with full knowledge of the risks and returns.
However, when a hostile takeover bid arrives, because the management and board of the target company resist the, they usually do not share any information that is not already publicly available. As a result, the acquiring firm takes a risk and may unwittingly acquire or serious technical problems.
In addition, the loss of key managers and leadership within the company may cause a shake-up within the target company that may disrupt its operations and threaten its viability.