Mergers and acquisitions are complex business transactions that can puzzle even the most astute businessperson or entrepreneur. But, for many companies in Louisiana, these types of transactions can be the best way to expand into new territory or diversify holdings. Unfortunately, sometimes two businesses that might merge, or one that might acquire another, don’t see eye-to-eye about the deal. That can result in what is termed a “hostile acquisition” under business law.
What is a hostile acquisition? Well, put simply, it is one company acquiring a new business that, at least at the management level, doesn’t want to be acquired. When that happens, the acquiring business is usually left with two options. The first is to make an offer, known as a “tender offer,” that would acquire the business in question for more than its share-value says it is worth. If this tender offer is rejected by the company’s management, the offer could be taken directly to the shareholders.
The second option is what is known as a “proxy fight.” In this option, some shareholders – who may want to accept the offer from the acquiring company – attempt to get other shareholders to allow them to vote in their stead. With enough proxy votes on their side, the acquiring company could prevail in a vote on the proposed acquisition.
Obviously, a hostile acquisition is probably not the preferred route when merging or acquiring a new business. When buying a company, it is always good to have the employees and management of that company onboard with the acquisition plan. The loss of those individuals in a hostile acquisition could result in the loss of a great deal of institutional knowledge.
Source: Investopedia.com, “Hostile Takeover,” Accessed April 16, 2017