A hostile takeover is a type of acquisition where a company (the acquirer) takes control of another company (the target company) without the approval or consent of the target company’s board of directors. There are two common ways for a hostile takeover to occur: a tender offer or a proxy vote. “A tender offer involves the acquirer offering to purchase stock shares from the target company’s shareholders at a premium to the market price. The goal is to acquire enough voting shares to have a controlling equity interest in the target company, usually over 50% of the voting stock.” On the other hand, a proxy vote “involves the acquirer trying to persuade existing shareholders of the target company to vote out the current management so that it will be easier to take over.” (LII)
Hostile takeovers can be contentious and may result in litigation between the acquiring company and the target company’s management. The target company’s management typically employs various defensive strategies, such as poison pills (measures to make the acquisition financially unattractive) or seeking alternative merger partners, to resist the hostile takeover.