The acquiror does not have sufficient cash to pay the target's shareholders.Ģ. Reasons for an all-stock or mostly-stock deal are usually (perhaps likely in your hypothetical, where the company being acquired is 'blue chip'):ġ. 'Consideration' paid to the target's shareholders, as it's known in the business, is almost always cash or shares of the acquiror.* One tends to see an all-cash deal when the target is relatively small, an all-stock deal when the companies are closely matched in size, and 'mixed consideration' when the relationship is somewhere in between. Would they be exchanged for Company Y stocks? What would happen to the value of my stocks in Company X, as a private shareholder?Īlmost always, you will receive more (either in cash, or in the market value of shares) than you had before the announcement. Steve Elvis America at 8:23 PM on May 29, 2007 It's hard to generalize, and the situation doesn't usually arise in the context you're describing. The willingness of the acquiring corporation to pay a market premium to acquire a control block would signal that the target was undervalued to begin with, but the presence of a control block would tend to drive the price of minority shares down. If for some reason, a publicly-traded minority was left, there would be a couple different contrary influences on the price. There are tax, corporate law, regulatory, and business reasons why this is a bad idea, and no real reason to do it.Ĭonsequently, the targets of hostile takeovers don't usually have a post-takeover market stock price. It's unusual for an acquiring corporation to purchase a majority interest in a publicly-traded corporation and leave a minority privately traded. Obviously this puts the shareholders in a tight spot, since they don't want to end up as part of that minority, so they might tender their shares for $50 even if they really would've liked more. It used to be that the acquiring corporation would make a public offer for, say, $50 per share, with the implicit understanding that if it gained a majority stake, the remaining minority would be squeezed out in a back-end merger for somewhat less than $50 per share. The target's shareholders of course have to cooperate, and if they're offered a good price for their stock and freely choose to sell it, it's hard to describe such an arrangement as 'predatory.' Of course, maybe they weren't offered a good price but were instead coerced, but that isn't so common these days, when the target is large and publicly traded.Ĭoercive public tender offers aren't supposed to be legal, and a lot of the old holes have been plugged.

Yeah, there isn't really an afterward, assuming you're talking about targets that started out publicly traded.įirst, remember that a 'hostile' takeover is merely one done without the cooperation of the target's board of directors.

What is a hostile takeover