By tackling these opportunities well in advance of a possible takeover bid, managers will generate the greatest possible value for current shareholders, even if a hostile bidder never materializes. So in theory, they should be able to capture at least as much value as any hostile predator envisions if they can preempt whatever value creation measures a predator may plan and execute them with rigor. Yet, incumbent managers enjoy a natural advantage over any potential acquirer because they have superior information about their companies’ operations and overall status. Managers who neglect these basics for too long-often as a consequence of noneconomic constraints perceived as unbeatable-not only destroy value by failing to implement sound management practices but may also be hard pressed to explain why a company wouldn’t be better off with new owners. In this way, a company has the best opportunity to capture the value of strategic, operational, financial, and portfolio moves that might otherwise make it an enticing target for an acquisition or hostile takeover by value-hungry predators. Much of this approach is simply good housekeeping: sticking to the basics of corporate strategy and rigorously implementing value-creating measures that the best managers have been executing all along. Even in today’s intense M&A market, companies can proactively assess the “extractable” value that an alternative owner might see and then move to capture it themselves. Please email us at: our experience, the best approach both to serve shareholders and to position companies for long-term strategic independence is to think and act preemptively. If you would like information about this content we will be happy to work with you. We strive to provide individuals with disabilities equal access to our website. Typically, such responses aim only to protect a company’s independence, whether or not it’s in the best interests of shareholders.

Especially when they are under attack, their first reaction may not be the one that would create the most value: they often take last-minute defensive action to resist hostile bids at all costs. Last year Europe’s share of worldwide hostile activity rose to 60 percent as a result of the increasing globalization and homogenization of financial practices and laws, as well as the reluctance of politicians and regulators to intervene.Īmid this frenzy, many managers wonder uneasily how vulnerable their companies might be to takeover and contemplate fixes to ward off unwanted attention.

Further complicating the landscape, notably in Europe, is a recent flood of value-creating cross-border opportunities that have appeared as traditional barriers to hostile pursuits erode. This activity is driven in part by a host of new players-including private-equity firms, hedge funds, and activist shareholders-that seem more and more willing to put companies in play at a moment’s notice.

What is a hostile takeover