Intelligent M & A: Navigating the Mergers and Acquisitions Minefield, 2nd Edition

CHAPTER 6The Best Defense

Not all mergers are welcome. There are as many different reasons to resist a takeover as there are deals. Often resistance is a tactic to get a higher price for the target's shareholders and a better deal for management as a strong defense will often result in a sweetening of the bidder's offer. The management of the target may believe that the company will perform better on its own. Or, cynically speaking, it may just be looking out for its own interests. That said, when looking at the 25 000 to 35 000 deals worldwide annually, only approximately 3% are unsolicited or hostile. Thus, most deals don't require a defense, unless being used by the target to get a better deal in an otherwise “friendly” negotiation.

However, the shareholders – and not management – have the ultimate say in the future direction of the company. Good corporate governance, laws, and regulations require that management should act in the interest of shareholders. Directors must act in their capacity as directors of the company and not for their personal or family shareholdings. Other legal requirements may also apply to the decisions of managers and directors, depending on the jurisdiction, such as the need to consult unions or employee works councils.

Nevertheless, it is often the case that a strong defense will buy time. This additional time may bring many changes to the battle, and the longer the deal process, typically the better for the target as it is possible to mount further ...