Question

2. What are the advantages and disadvantages of the friendly versus hostile approaches to a corporate takeover? Be specific

Answer 1

Answer-

Advantages of friendly Corporate takeover

1) In case of friendly takeover the acquirer and target company are satisfied with the terms and conditions of the deal and leads to hassle free process
2) The target company will not have to face any challenges and hurdles or any losses unlike hostile takeover
3) Due to the agreement between the acquirer and target the price paid per share for stock acquisition or cash are better and justified

Disadvantages of friendly Corporate takeover

1) The friendly takeover may be disadvantageous for acquirer as they may have to pay more price to the target company for acquisition
2) The friendly takeover may lead to retention of most of the employees of target company which may be disadvantageous for acquiring company.
3) The takeover needs regulatory approval which may not be given consent which can lead to waste of time and efforts made by the management of acquirer and target company.
4) The takeover needs the shareholders approval which can hinder the acquisition if it's not in the best interests of target company shareholders

Advantages of hostile Corporate takeover
1) The acquirer can take the advantage of getting better deal for acquisition that will help in future growth in terms of market share.
2) The hostile takeover can lead to consolidation which will reduce the players in the industry which can lead to better positioning for acquirer.

Disadvantages of hostile Corporate takeover

1) The target company will not be able to get good bargain in terms of price of stock price which causes losses to target company shareholders
2) The target company can use various pre defense or post defense takeover mechanisms which may lead to various regulatory hurdles for acquirer.
3) The shareholders of the target company may loose due to hostile takeover as they cannot be able to get better price.
4) The employees of the target company may loose jobs after the hostile acquisition or takeover.
5) The target company shareholders can disapprove the acquisition if approval is required through voting.