Elon Musk has been in the news lately surrounding his takeover of Twitter. The Board of Directors finally agreed for Twitter to be taken private by Musk at $54.20 a share which represents a 38% premium compared to the share price before Musk started his takeover bid. I’m using my blog this week to give you a little more information on the mechanics of a corporate takeover.
Takeovers can be either hostile or friendly. In the case of a friendly takeover, both parties are agreeable, and they cooperate to determine the terms of the deal. In the case of a hostile takeover, the Board of Directors of the target company is not in favor of being acquired by this company or individual. Below are a couple of tactics commonly used in a hostile takeover:
Tender offer- The would-be acquirer could make a tender offer which is an SEC-regulated tactic where a price generally above the market value of the stock is offered to shareholders to entice them to sell. In doing this, the bidder is seeking to buy enough shares to have a controlling interest in the company.
Proxy fight- In this case, the suitor will court shareholders to entice them to the right to vote for board members to oust the existing board and install a board they deem more favorable.
In summary, corporate takeovers can be very interesting and can have a significant effect on the share price of the target company. Click below to read about five of the most well-known takeovers in history: