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Marketplace Scratch Pad

What’s with all the hostility?

Scott Jagow Nov 19, 2009

Perhaps you’ve been hearing about Kraft’s hostile takeover bid for Cadbury or Barnes and Noble’s “poison pill” defense to ward off a hostile bid. Might be a good time to explain hostile takeovers and why we’re likely to see more of them.

I’ll leave the explaining part to our WhiteBoard guru Paddy Hirsch. No one does it better. Paddy discusses a takeover battle you might not have heard about: Three Little Pigs software vs MicroHog:

Hostile takeovers from Marketplace on Vimeo.

I found this statistic surprising: Dealogic says last year, 32 percent of global announced deals were hostile. Financier Worldwide predicts that M & A activity picks up again, hostile takeovers will only increase:

…unsolicited offers on the wider market will continue to be driven by the weakness of potential target companies. Stock prices remain depressed and for those subject to a takeover, defence options are still limited. Compared to a decade ago, when boards had a number of tactics they could use to halt a hostile bid, today boards have far fewer options available to them. As it stands, less than a quarter of S&P 500 companies have shareholder rights plans and even fewer stagger their board members, allowing hostile acquirers to target the entire boardroom at once.

But perhaps the single most influential factor is the lack of public disapproval towards hostile companies. Public and media outcry towards unwanted takeover attempts is now over, and in the pursuit of high returns, it is considered respectable to make a strategic offer regardless of the deal’s nature.

To paraphrase Norm Peterson from Cheers: It’s a dog-eat-dog world, and a lot of companies are wearing Milk-Bone underwear.

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