Takeover

Definition of 'Takeover'


When an acquiring company makes a bid for a target company. If the takeover goes through, the acquiring company becomes responsible for all of the target company’s operations, holdings and debt. When the target is a publicly traded company, the acquiring company will make an offer for all of the target’s outstanding shares.

Investopedia explains 'Takeover'


A welcome takeover generally goes smoothly because both companies consider it a positive situation. In contrast, an unwelcome or hostile takeover can be quite unpleasant. The acquiring firm can use unfavorable tactics such as a dawn raid (where it buys a substantial stake in the target company as soon as the markets open, causing the target to lose control of the company before it realizes what is happening). The target firm’s management and board of directors may strongly resist takeover attempts through tactics such as a poison pill, which lets the target’s shareholders purchase more shares at a discount in order to dilute the acquirer’s holdings and make a takeover more expensive.

A takeover is virtually the same as an acquisition, except that “takeover” has a negative connotation, indicating the target does not wish to be purchased. Why would one company want to buy another company against that company’s will? The bidder might be seeking to increase its market share or to achieve economies of scale that will help it reduce its costs and thereby increase its profits. Companies that make attractive takeover targets include those that have a unique niche in a particular product or service, small companies with viable products or services but insufficient financing, a similar company in close geographic proximity where combining forces could improve efficiency and otherwise viable companies that are paying too much for debt that could be refinanced at a lower cost if a larger company with better credit took over.


Filed Under: ,

comments powered by Disqus
Hot Definitions
  1. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  2. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  3. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  4. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  5. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  6. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
Trading Center