Types of takeover
[edit] Friendly takeovers
[edit] Hostile takeovers

A hostile takeover allows a suitor to take over a target company whose management is unwilling to agree to a merger or takeover. A takeover is considered « hostile » if the target company’s board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firmintention to make an offer.

A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a fixed price above the current market price. Tender offers in the United States are regulated by the Williams Act. An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough shareholders, usually a simplemajority, to replace the management with a new one which will approve the takeover. Another method involves quietly purchasing enough stock on the open market, known as a creeping tender offer, to effect a change in management. In all of these ways, management resists the acquisition but it is carried out anyway.

The main consequence of a bid being considered hostile is practical rather thanlegal. If the board of the target cooperates, the bidder can conduct extensive due diligence into the affairs of the target company, providing the bidder with a comprehensive analysis of the target company’s finances. In contrast, a hostile bidder will only have more limited, publicly-available information about the target company available, rendering the bidder vulnerable to hidden risks regardingthe target company’s finances. An additional problem is that takeovers often require loans provided by banks in order service the offer, but banks are often less willing to back a hostile bidder because of the relative lack of information about the target available to them.
[edit] Reverse takeovers
Main article: Reverse takeover

A reverse takeover is a type of takeover where a private companyacquires a public company. This is usually done at the instigation of the larger, private company, the purpose being for the private company to effectively float itself while avoiding some of the expense and time involved in a conventional IPO. However, under AIM rules, a reverse take-over is an acquisition or acquisitions in a twelve month period which for an AIM company would:

* exceed100% in any of the class tests; or
* result in a fundamental change in its business, board or voting control; or
* in the case of an investing company, depart substantially from the investing strategy stated in its admission document or, where no admission document was produced on admission, depart substantially from the investing strategy stated in its pre-admission announcement or,depart substantially from the investing strategy.

An individual or organization-sometimes known as corporate raider-can purchase a large fraction of the company’s stock and in doing so get enough votes to replace the board of directors and the CEO. With a new superior management team, the stock is a much more attractive investment, which would likely result in a price rise and a profit for thecorporate raider and the other shareholders.
[edit] Backflip takeovers

A backflip takeover is any sort of takeover in which the acquiring company turns itself into a subsidiary of the purchased company. This type of a takeover rarely occurs.
[edit] Financing a takeover
[edit] Funding

Often a company acquiring another pays a specified amount for it. This money can be raised in a number of ways.Although the company may have sufficient funds available in its account, remitting payment entirely from the acquiring company’s cash on hand is unusual. More often, it will be borrowed from a bank, or raised by an issue of bonds. Acquisitions financed through debt are known as leveraged buyouts, and the debt will often be moved down onto the balance sheet of the acquired company. The acquired…