Mergers, Acquisitions, and Corporate Restructurings, 6th Edition

CHAPTER SIX6

Takeover Tactics

FROM A TARGET'S PERSPECTIVE, hostile bids are offers that the target publicly refuses to accept. In this chapter we focus on the options hostile bidders can use to complete a takeover of an unwilling target.

The fourth merger wave is considered by some the era of the hostile takeover; however, even during that period most takeovers were friendly deals. By the time we reached the fifth merger wave of the 1990s, the percentage of friendly deals increased even more. For example, using one data set Andrade Stafford and Mitchell found that 14% of deals were unfriendly in the 1980s, but that percentage fell to only 4% in the 1990s.¹ In the 2000s friendly deals are still much more common. Nonetheless, hostile deals are still important and actually can be interesting if not even entertaining.

This chapter analyzes the evolution of takeover tactics over the past quarter of a century and discusses how they are currently used and their relative effectiveness. It will become apparent that these tactics have evolved and changed substantially over time.

The takeover options for the hostile bidder are fewer in number compared with the broad variety of defenses that targets implement in advance of and during a hostile bid. The bidder is typically left with the choice of three main tactics: a bear hug, a tender offer, and a proxy fight. Each tactic has its strengths and weaknesses. In addition, each may be implemented in varying manners to increase the likelihood of ...