Explain this, please, in simple terms. I am reading today, that a company is attempting a hostile takeover of the Disney company. The ‘why’, I am assuming, is to make that company bigger. The ‘how’ is what has me puzzled. Hypothetically, you have company A, making money, no desire to sell, and along comes company B, saying ‘we want to buy you out, and we are going to do it!’ What the hell?
As I understand it (and I’m no economist), it is when one company attempts to take possession or force a merge between two companies against the wishes of the upper management. They do this by acquiring a controlling amounts of stock either literally or just the support of the owners of said stock to force a yes vote on a merge or sellout. Keep in mind that upper management usually does not have a controlling interest in the company especially big companies.
Something simpler.
Company A wants to buy Company B.
Company B’s CEO does not want to be bought.
Company A acquires the support of 51% of the stockholders or purchases 51% of the stock.
Company A then forces Company B to votes yes to merge with Company A.
Thank you. Good answers.
I am now assuming that it never comes as a surprise to company A. The CEO’s must see it coming just by watching stock sales, no?
It’s never a surprise. Often, the acquiring company first tries a friendly takeover (they’re easier and cost less). And if they decide to buy up stock despite the other company’s wishes, they usually announce the fact quite publicly: “World Wide Widget is currently selling for $32. We’ll pay $45 for its shares.”
I’m also pretty sure that you have to file something with the SEC announcing your intention.
Nintendo recently spent a large sum to buy back a significant portion of their stocks to prevent this very situation, a hostile takeover. Just thought that was interesting.