takeover

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Takeover

General term referring to transfer of control of a firm from one group of shareholders to another group of shareholders. Change in the controlling interest of a corporation, either through a friendly acquisition or an unfriendly, hostile, bid. A hostile takeover (with the aim of replacing current existing management) is usually attempted through a public tender offer.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Acquisition

An investment in which a company or person buys a publicly-traded company, or, more commonly, most of the shares in that company. For example, if Corporation A buys 51% or more of Corporation B, then Corporation B becomes a subsidiary of Corporation A, and the activity is called an acquisition. A single investor may buy out a publicly-traded company; one calls this "going private." Acquisitions occur in exchange for cash, stock, or both. Acquisitions may be friendly or hostile; a friendly acquisition occurs when the board of directors supports the acquisition and a hostile acquisition occurs when it does not. See also: Antitakeover measure.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

takeover

The acquisition of controlling interest in a firm. Although the term is often used to refer to acquisition by a party hostile to the target's management, many takeovers are friendly. See also friendly takeover, raider, unfriendly takeover.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

takeover

or

acquisition

the acquisition by one firm of another firm. For companies listed on the STOCK MARKET this involves the acquiring firm either buying in the open market, or bidding for the voting SHARES in the target firm (See BID, TAKEOVER BID). Unlike a MERGER, which is usually arranged by mutual agreement between the two firms' management, a takeover is often resisted by the target firm's management, so that the bidder must convince shareholders that selling out to the acquirer, or taking shares in it in the case of a share exchange, is of benefit to them. Although a 51% stake in the target company would be sufficient to allow the acquiring company to exercise effective control, generally it would wish to take full control so as to be free from the interference of minority interests.

Takeovers are a form of EXTERNAL GROWTH by which firms expand in a horizontal, vertical and conglomerate direction. Conglomerate takeovers (the acquisition of a firm in an unrelated market) are undertaken primarily as a means of spreading business risks and to enable the firm to reorientate itself away from static or declining markets into areas offering good long-term growth and profit potential (see DIVERSIFICATION). Vertical takeovers (the acquisition of a firm which supplies inputs to the acquirer or which distributes its products) may enable the firm to cut its costs by, for example, linking together a series of sequentially related input assembly operations or reducing stockholding costs; vertical takeovers give the firm greater security of input supplies and access to distribution channels and the potential to put non-integrated competitors at a disadvantage (see VERTICAL INTEGRATION). Horizontal takeovers (the acquisition of a competitor operating in the same market) may allow the firm to reduce its costs by realizing economies of scale in production and marketing, and by taking over the rival supplier the firm can increase its market share and perhaps exercise some degree of monopolistic control over the market (see HORIZONTAL INTEGRATION).

From society's point of view takeovers may be beneficial in so far as they improve efficiency and cut costs and prices, but also (potentially) harmful if they eliminate competition and create monopolies. For this reason, in the UK, under the FAIR TRADING ACT, 1973, takeovers and mergers which lead to, or extend, a firm's market share of a particular product beyond 25%, or where the value of assets taken over is greater than £70 million, can be referred by the OFFICE OF FAIR TRADING to the COMPETITION COMMISSION to decide whether or not they are in the public interest. See MARKET ENTRY, BARRIERS TO ENTRY, CITY CODE ON TAKEOVERS AND MERGERS, BUSINESS POLICY, MANAGEMENT BUY-IN, MANAGEMENT BUYOUT, COMPETITION POLICY (UK), COMPETITION POLICY (EU).

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

takeover

or

acquisition

the acquisition by one FIRM of some other firm. Unlike a MERGER, which is usually arranged by mutual agreement between the firms involved, takeovers usually involve one firm mounting a ‘hostile’ TAKEOVER BID without the agreement of the victim firm's management. For publicly quoted companies, this involves one company buying 50% or more of the voting shares of the other so as to exercise effective control over it, although generally the acquiring company would wish to purchase all the shares of the other company.

Three broad categories of takeover may be identified:

  1. horizontal takeovers, involving firms that are direct competitors in the same market;
  2. vertical takeovers, involving firms that stand in a supplier-customer relationship;
  3. conglomerate takeovers, involving firms operating in unrelated markets that are seeking to diversify their activities.

From the firm's point of view, a takeover can be advantageous because it may enable the firm to reduce production and distribution costs, acquire BRAND names, expand its existing activities or move into new areas, or remove troublesome competition and increase its market power. In terms of their wider impact on the operation of market processes, takeovers may, on the one hand, promote greater efficiency in resource use, or, on the other hand, by reducing competition, lead to a less efficient allocation of resources. In sum, they may involve, simultaneously, both benefits and detriments (see MERGER for further discussion).

Under the FAIR TRADING ACT 1973, takeovers that create or extend a firm's market share of a particular product in excess of 25%, or where the value of assets acquired is over £70 million, can be referred by the OFFICE OF FAIR TRADING to the COMPETITION COMMISSION to determine whether or not they are in the public interest. See also ASSET STRIPPER, COMPETITION POLICY (UK), COMPETITION POLICY (EU), WILLIAMSON TRADEOFF MODEL, HORIZONTAL INTEGRATION, VERTICAL INTEGRATION, DIVERSIFICATION, CITY CODE, MARKET ENTRY.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Conversely, the collapse in the pound following the Brexit vote has meant British takeover targets are cheaper for dollar and eurodenominated buyers.
The Takeover Panel's consultation is a welcome first step in starting to move towards a more transparent and robust framework that can work for industry and our economy.
Dominium invests in its communities for the long term and establishes a five-year asset plan for takeover properties to ensure the longevity of these assets.
Once a takeover has been agreed by the respective boards, the Rules require an immediate announcement to the market and accordingly the bid team of both the offeror and offerree will need to be very well prepared because once an announcement has been made, withdrawing an offer will generally not be permitted.
A broker who focuses on voluntary takeovers only needs to be asked, "Is that all there is?"
Weak embeddedness of the value that kigyou wa kabunushi-no-mono (corporations belong to shareholders) is also contributing to the difficulties of hostile takeovers in Japan.
Figure 1 shows the average impact of takeovers for the small and big size portfolios over time as measured by the difference between returns to size-sorted portfolios and the same portfolios with target firms removed during the takeover window.
But even those against outright government intervention (which I suspect would include some business people) might note that takeovers - especially hostile ones - are anyway often more difficult in other countries.
Key recommendations include ensuring companies take into account the impact of a takeover on employees and giving them greater opportunity to make their views known.
Britain s takeover watchdog is consulting on possible changes that could raise the bar for acquisitions after Kraft Foods controversial takeover of Cadbury at the start of the year.
Financial Services Secretary Lord Myners said takeovers "frequently fail to deliver on promises and allow no voice for other stakeholders".
The financial services secretary said takeovers "frequently fail to deliver on promises and allow no voice for other stakeholders, including employees and key customers and suppliers".