The return of the hostile takeover

On Behalf of | Apr 21, 2021 | Uncategorized

Hostile takeovers reached something of a zenith during the 1980s. According to Harvard University School of Law, there were no less than 160 hostile takeover bids in the United States in 1988 alone. As we edge further into the 21st century, we are seeing an uptick in the number of hostile takeover bids in the United States. Texas corporations are not immune from this prospect.

Three commonplace hostile takeover defense errors

When it comes to the prospect of a hostile takeover move against a corporation, there is a trio of mistakes commonly made by these enterprises. These errors can open the door to a successful and yet unwelcome corporate takeover and involve protracted business litigation:

  • Failure to deploy defenses
  • Overemphasis on corporate or executive governance
  • Reluctance to develop reasonable alternatives

Failure to deploy defenses

In the minds of more than a few corporate executives and board members, the mere idea of deploying corporate defenses in the face of a hostile takeover has fallen out of favor or somehow is viewed as unseemly. In fact, deploying lawful defenses to a threatened hostile takeover is completely appropriate. At the heart of that process is the development of a strategy that demonstrates the intrinsic value of a particular corporation exceeds the hostile bidder’s share price.

Overemphasis on corporate or executive governance

The bottom line of any hostile corporate takeover bid is money. Nonetheless, time and again the powers that be in a corporation seem to fail to recognize this stark reality and spend their time fiddling with corporate and executive governance.

Reluctance to develop reasonable alternatives

Finally, a recurring mistake made in the face of a hostile takeover bid is the failure to craft and propose reasonable alternatives to an unwelcome bidder and its scheme. Rather than conceive and put forth reasonable alternatives, a corporation’s existing leadership becomes entrenched.

A proper and ultimately effective response to a hostile takeover effort must be as proactive as possible. This includes making sure suitable countermeasures are initiated in a timely manner.