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What is a Bust-Up Takeover?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 14 September 2016
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A bust-up takeover is a situation in which some or all of the assets associated with a recently acquired company are sold in order to cover the costs that were incurred during the acquisition process. In some cases, the bust-up takeover will focus on a few key assets of the corporation in order to settle the indebtedness, while still maintaining the operations and functionality of the corporation. In other situations, the focus may be on completely dismantling the company, dispensing with all associated expenses, and dividing the profits among the investors who initiated the takeover.

When a leveraged buyout is the means of orchestrating a friendly takeover of a company, the investors usually do so with an eye to restructuring the corporation and continuing operations. If this is the goal, the group of investors will often focus their attention on target companies that have a number of assets that are not central to the core business model of the corporation. As part of the restructure, those peripheral assets can be placed on the market and sold as a means of quickly recouping the expenses incurred during the takeover. Thus, the newly restructured company begins a new life with little or no debt to carry, a viable if somewhat smaller financial portfolio, and a renewed focus on the core business.

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In takeovers where the aim is to acquire the company and dismantle it completely, a target company is selected that has plenty of assets which can be solid off in lots or singly. Often, in this version of a bust-up takeover, the emphasis is on a quick sale of the assets so that expenses are repaid and the remaining profit can be distributed among the investors in the hostile takeover strategy. Sometimes there is not any real effort to find buyers who want to continue to operate the company in some fashion. Instead, the focus is on selling the assets to the highest bidder.

The general concept of a bust-up takeover can be applied to both friendly acquisitions and to hostile takeover attempts. It is not unusual for at least a portion of the assets of a company to be sold by new owners as a means of recouping expenses. However, a bust-up takeover usually involves advance plans and intentions to sell off specific assets after the acquisition, rather than evaluating the feasibility of selling assets after actually taking control of the corporation.

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