A takeover happens when one company makes a bid to acquire a target company.If the bid goes through, the acquiring company becomes responsible for the target’s operations, holdings and debt. If the target is publicly traded, the acquiring company makes an offer on its outstanding shares. Takeovers can be a welcome development. Both companies may consider the takeover as an opportunity to form a new entity that’s more efficient and more valuable to shareholders. But hostile takeovers can be ugly. Bidders initiate hostile takeovers to increase their market share, or to cut costs through economies of scale. Many takeovers involve some nasty tactics. For example, an acquiring company may try to take over a reluctant target by using a dawn raid, which entails buying a big stake in the target as soon as the markets open. The target loses control before it realizes what’s happening. Some targets use a poison pill to thwart a bidder. They sell discounted shares to stockholders to dilute the acquirer’s holdings, boosting the takeover’s price tag. While some takeovers prove lucrative, investors need to understand the ramifications on their shares, and any strategy a company uses to avoid one.