Question

1. With reference to corporate restructuring, suggest five defence techniques that a targeted company might use to avoid a hostile takeover bid.

Answer 1

Corporate Restructuring

This is an organizational process in which the management and higher authorities reorganize all its components of the organization like operations, management and its process in order to strengthen the core of the company and which will help them increase their performance and achieve their goals and objectives effectively. Organizations have several threats that they need to tackle and take necessary steps to avoid them and one of the major threats is being taken over by another company.

Now let us discuss some techniques through which the organization can avoid the situation of a hostile takeover.

• Shares play a vital role in running the business as they provide financial support to the organization but they can also help the other firms to take the organization and to avoid that the organization should limit and control the sale of shares of its organization.
• Controlling the debts is also very important for the organization to avoid the situation being taken over. This can be done only by controlling the expense and maintaining the record of a healthy debt this will ensure that the organization is not pushed under huge debt which may cause a harmful effect.
• Creating a process in the voting rights for the post of the board of directors will be largely given to organizational management rather than giving it to the shareholders this will keep the board of directors at the safe distance and minimize the external interference from shareholders.
• The organization can undergo an agreement with the external trusted party which will have the right to make decisions for the organization and its development when there is a dispute within the organization or a change of roles of management. This will keep external parties that are ready to take over the organization outside the loop.
• The organization can create a process of selling shares in which they will limit the percent of shares any party or organization can buy if they are willing to buy more from the limited numbers they will have to pay higher charges to buy those desired shares. This will make it expensive for the organization to purchase maximum numbers of shares in order to take any hostile actions.