Friendly Takeover

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DEFINITION of 'Friendly Takeover'

A situation in which a target company's management and board of directors agree to a merger or acquisition by another company. In a friendly takeover, a public offer of stock or cash is made by the acquiring firm, and the board of the target firm will publicly approve the buyout terms, which may yet be subject to shareholder or regulatory approval. This stands in contrast to a hostile takeover, where the company being acquired does not approve of the buyout and fights against the acquisition.

BREAKING DOWN 'Friendly Takeover'

In most cases, if the board approves a buyout offer from an acquiring firm, the shareholders will vote to pass it as well. The key determinant in whether the buyout will occur is the price per share being offered. The acquiring company will offer a premium to the current market price, but the size of this premium (given the company's growth prospects) will determine the overall support for the buyout within the target company.

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RELATED FAQS
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  3. How long does it take to execute an M&A deal?

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  4. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>
  5. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  6. Are companies with high Book Value Of Equity Per Share (BVPS) takeover targets?

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