Hostile Takeover (Essay Sample)
Answer the question below: Include some news that is less than a year old that discusses an in-process or recently completed merger in your answer. Briefly discuss the main issues in that merger and whom the merger is likely to benefit or hurt.
Part 1: What is a hostile takeover and what generally happens to the stock price of the firm being acquired in a hostile takeover?
In answering question 1, define hostile takeover and discuss the impacts of takeover announcement on stock price of the acquired company. What impacts hostile takeover would have on stock prices if the deal is likely to go through and when the deal is likely to fail?
Part 2: How does a hostile takeover affect the company’s stakeholders (shareholders, executives, employees, and society in general)? Is it usually beneficial or detrimental to these stakeholders? Why?
In question 2, discuss how a hostile takeover affects the company’s stakeholders (shareholders, executives, employees, and society in general)? Is it usually beneficial or detrimental to these stakeholders? Why?
A hostile Takeover
A hostile takeover refers to a merger or acquisition of one company (Target Company) by another (acquirer) against the wishes or approval of the board of directors (usually the management) of the target company. A hostile takeover occurs despite the resistance by the target firm's management as the stronger business absorbs the target company in terms of market control. In May 2015, Teva Pharmaceuticals Industries completed acquisition of Auspex Pharmaceuticals in a Hostile Takeover for $3.5 Billion in the corporate control that has been experienced in the European Market in recent times. Teva sought to increase its Neurology unit as well as its product offering (Wainer, 2015).
Teva investors apparently believed that important shareholder value would be produced if it acquired Auspex due to potential synergies. This was confirmed after a substantial short increase in Teva shares. Acquirers usually tend to use overvalued equity to buy the target company's share and in the process often ends up doing an overpayment. This makes the stock prices to underperform after the subsequent acquisition whereby they may tend to decline in their price level (Wainer, 2015).
In Mergers and Acq...
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