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What is a Friendly Takeover?

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  • Last Modified Date: 23 September 2016
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Company takeovers may be accomplished with cooperation and acceptance or negativity and a fight. If both of the companies agree to the takeover, it is called a friendly takeover. In a friendly takeover, company A, for example, wants to acquire company B. If company B’s board agrees to the terms of the takeover, it is referred to as a friendly takeover. If company B’s board rejects the offer, however, company A may proceed anyway in what is referred to as a hostile takeover.

It is easy to imagine that a company takeover is always negative. This type of situation, however, may be viewed as positive in many cases. For example, a company may be presented with a merger offer that is for the good of the company and beneficial for those involved. In such a case, the company’s board of directors may be happy to accept the offer and put it to shareholder vote.

When a board of directors approves of a takeover, it is likely that the company's shareholders will vote in favor of the friendly takeover as well. The enthusiasm with which an offer is received, however, often depends on the amount of the buyout offer. Lower buyout offers may be met with more resistance.

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Many takeovers are considered friendly, but situations can also turn hostile. This typically happens when the company’s board of directors doesn’t approve of the offer or its shareholders vote against it. For example, a company’s board of directors may believe that an offer is too low or that an acquisition will be negative for the company and those involved. When a takeover offer is rejected, the acquiring company may force the takeover by purchasing enough of the other company's stock to gain control of the company, without the board’s agreement or approval.

It is worth noting that a rejected takeover offer may not always lead to a hostile takeover. Sometimes the two companies engage in negotiations until they come up with a deal upon which they can agree. In other cases, the acquiring company may only wish to acquire the company on friendly terms, so it may move on when its offer is rejected. In fact, some companies that do decide to proceed with a hostile takeover fail to obtain control of the other company. For example, the acquiring company may fail to purchase the amount of stock needed for the hostile takeover.

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sunnySkys
Post 7

@ceilingcat - The world of business can be quite cut-throat. If a company decides that it would be in their best interests to acquire another company, sometimes they'll just go ahead and make it happen, no matter what the costs.

Even if they have to deal with some resistance from the company they took over, it can still work out well for them in the end.

ceilingcat
Post 6

I don't know a lot about business, but it seems like a friendly takeover would be much better for all parties involved. That way both companies could be happy and it would be a mutually beneficial situation.

However, I could see a hostile takeover going very poorly. I imagine the top level executives at the company that was taken over could make life rather difficult for their new "partner." Wouldn't it be better just to acquire a company on friendly terms or not acquire it at all?

manykitties2
Post 5

When I think of a friendly takeover the acquisition of YouTube by Google comes to mind. That seemed to be a case of everyone ending up pretty happy, and may I add, extremely wealthy, on the part of the guys who sold their idea.

The two founders of YouTube, both in their twenties, walked away with 1.65 billion dollars for their good idea cooked up in a garage. I was really shocked reading their story because it just goes to show how random extreme wealth can be. I wouldn't mind in the least being part of a friendly takeover if it just meant a bigger company pouring cash on me until I was happy.

popcorn
Post 4

The company I am working at is currently undergoing a friendly takeover and all of the employees are worried about what this is going to mean for us. We're actually referring to the whole thing as, "the big takeover".

I have been reading that one of the worst things about takeovers, friendly or otherwise, is that there are always a lot of job cuts as restructuring is completed. This rather makes the takeover hostile to the employees, even if it isn't for the upper management.

What do you think the odds are of those that manage to keep their jobs ending up losing benefits? This whole friendly takeover is making me really nervous.

cupcake15
Post 3

@SurfNTurf -Sometimes a company wants to remain independent and does not want to be bought out regardless of the financial problems. The other day I was reading about a potential hostile takeover of Suzuki by Volkswagen.

Suzuki wants no part of the merger and is really making it difficult for Volkswagen. I wonder at what point does a company give up the fight and agree to the merger and at what point does the other company give up its plans for a merger. It must be really stressful for the employees of both companies.

I could not imagine having to go through something like this. Most people know that when the big takeover like this takes place that a lot of people are going to lose their jobs.

surfNturf
Post 2

@Mutsy - At least these potential mergers are friendly. I remember the potential Microsoft and Yahoo takeover that would have been very hostile if it went through.

I was reading that Yahoo only owned 30% of its own stock and the remaining 70% was owned by individuals. All Microsoft had to do was to buy the outstanding stock from this 70%, but despite the strategic advantage that Microsoft had, Yahoo threatened that it would partner with Google and purse anti-trust claims against them if they continued the fight.

I realize that Yahoo did not want to be bought by Microsoft, but they were having some financial difficulty and could have been better off in the long run if they would have merged with Microsoft. That is just my two cents.

mutsy
Post 1

I was reading an article about a possible friendly merger going on with Cadbury and Hershey’s as well as Cadbury and Kraft foods. It seems that Kraft foods has offered a lot more money than Hershey in the friendly acquisition, but Cadbury executives are hoping that Hershey would come up with more money because they see Hershey as a better fit than Kraft because they are in the same business but have different strategic advantages.

I also read that Hershey already has the ability to manufacture many of the Cadbury signature pieces and if Hershey buys Cadbury many of the Cadbury management would stay on in consultative positions which is another reason why Cadbury prefers Hershey. This would be a really big takeover if it went through.

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