Property management acquisitions can be friendly or hostile, hopefully you never have to deal with the latter. Although rare, hostile acquisitions can occur through a tender offer or a proxy fight, and both can present a number of challenges for the companies involved in the takeover. Nevertheless, these acquisitions can be done with the help of a strong legal team, and it’s crucial for both the acquiring firm and the target company to know their rights during the process.
While Landmark Title Assurance Agency cannot provide legal advice for these situations, our team can provide some guidance regarding what an individual or company can expect during a hostile takeover. To dive into this a little more, we’d like to first break down the inner workings of a hostile takeover. Simply stated, a hostile takeover occurs when the target company’s management does not want an acquisition to go through successfully. As a result, the target company’s management may defend themselves against a hostile takeover by using different strategies to win their case.
According to Investopedia, there are a number of controversial strategies used in hostile takeovers. These strategies are given unusual names, such as the poison pill, the crown-jewel defense, a golden parachute, or the Pac-Man defense. If you have a moment, click on the hyperlinked strategies to learn more about how they work in some hostile acquisitions.
Under these situations, the target companies resisting the takeover may have an opportunity to employ reactive defenses as soon as the hostile bid is made. Or, in some cases, the target company has preemptive takeover defenses in place to make the takeover much more difficult.
As we mentioned previously, there are two different ways a hostile takeover can occur: through a tender offer or a proxy fight. When a company makes a tender offer to purchase the shares of another company, the target company’s board of directors may reject the offer even if the offer is at a premium price well above the current market value. If this occurs, the acquiring company make take their previous offer to the target company’s shareholders who are much more likely to accept it if it’s at a sufficient premium value.
In a proxy fight, opposing groups of stockholders may have to vote for their shares. If they acquire enough proxies, they can use them to vote to accept the offer. Still, as we mentioned earlier, the target company may have a number of preemptive and reactive defenses up their sleeve to make both processes challenging. Preemptive takeover defenses may include things like establishing stocks with differential voting rights, establishing an employee stock ownership program, and employing a crown jewel defense, which requires the sale of valuable assets in the event of a hostile takeover.
Reactive defenses may include a shareholder rights plan, the resignation of key personnel, or aggressively buying stock in the company attempting the takeover. Regardless of what side you’re on, it’s important you remain well informed and prepare for a lengthy takeover process. Part of that preparation is having the right team members in place. If a hostile takeover involves the need to sell or purchase properties Landmark Title Assurance Agency can assist and work with the parties and legal teams to complete any transactions. If you have any questions or need assistance call 602-748-2800 today!