Busted Takeover
 |
Definition of 'Busted Takeover'A highly leveraged corporate buyout that is contingent upon the selling off of some of the acquired company's assets. A busted takeover occurs when an acquired company's assets are sold in order to meet the cost of acquisition. The assets of the company being acquired may be used as collateral for the financing required for the deal to go through. Once the target company is acquired, some of its assets are sold in order to pay back a portion of the funds that the acquiring company used to finance the initial buyout. The acquiring company must properly evaluate the target company's assets to confirm that the sale of the assets will adequately cover the debt. |
 |
Investopedia explains 'Busted Takeover'The term 'busted takeover' is used in the world of mergers and acquisitions, or "M&A." Mergers, acquisitions and takeovers allow companies to develop competitive advantages and increase shareholder value. In a merger, two companies mutually agree to join forces and become one company. An acquisition is a corporate action in which one company purchases most or all of a target company's ownership stakes in order to take control of the target company. Acquisitions can be either friendly, where the target company agrees to be acquired, or hostile, where the target company does not agree and resists the acquisition. A hostile acquisition is often called a takeover, or a hostile takeover.A busted takeover may be a successful strategy when the acquiring company has limited cash (and needs to borrow to fund the purchase) and the target company has undervalued assets that the acquiring company wishes to exploit. For example, assume company ABC wants to acquire company XYZ because it is looking to diversify. Company ABC is cash poor and will need to leverage itself to finance the deal. As a term of the deal, company ABC must agree to sell off some of company XYZ's assets and give the proceeds to the financier, repaying part of the amount that company ABC had to borrow to finance the deal. |
Related Definitions
Articles Of Interest
-
Mergers And Acquisitions: Understanding Takeovers
In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game. -
The Basics Of Mergers And Acquisitions
Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work. -
War's Influence On Wall Street
Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common. -
How Leverage Is Used In Forex Trading
Forex trading by retail investors has grown by leaps and bounds in recent years, thanks to the proliferation of online trading platforms and the availability of cheap credit. The use of leverage ... -
What Is Spread Betting?
The temptation and perils of being over leveraged is a major pitfall of spread betting. However, the low capital outlay necessary, risk management tools available and tax benefits make spread ... -
Cashing In On Corporate Restructuring
Companies use M&As and spinoffs to boost profits - learn how you can do the same. -
Leverage: What It Is And How It Works
Leverage is an investment strategy of using borrowed money to generate outsized investment returns. Before getting into greater detail on how leverage works in an investment context, it is useful ... -
The Basics of Forex Leveraging
A closer look at the controversial topic of leverage in forex trading. -
Nokia Buys Out Siemens, Are Phones Now On The Block?
In buying Siemens' share of Nokia Siemens Network, Nokia may have just bought its future -
Valeant Eyes Bausch & Lomb
Canadian pharmaceutical company Valeant has made a name for itself through acquisitions. On May 27 it announced that it was buying Bausch & Lomb for $8.7 billion making it a global leader in ...
Free Annual Reports