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What is the difference between an acquisition and a takeover?

On Behalf of | Nov 20, 2014 | Business Formation & Planning |

For Michigan businesses, the terms acquisitions and takeovers are sometimes interchangeably used. There are different meanings between the two business maneuvers, however, depending upon whether the target company is acquired with its permission or without.

Acquisitions occur when one company acquires another with the permission of its board to do so. Companies pursue acquisitions for several purposes. First, the acquisition may result in the company increasing its market share. The acquired company may also provide additional needed facilities to the acquiring company. In some cases, the acquired company may provide new technology as well.

Takeovers are also referred to as hostile takeovers. In contrast to other acquisitions, takeovers occur when a company takes over and purchases a company without the permission of the company or its board of directors. There are several methods by which companies might attempt a takeover. The company may try to purchase a majority of the company’s stock, either directly from shareholders or from secondary markets. The company may also engage in a proxy fight, in which it attempts to win the approval of the shareholders to assume control of the board of directors of the target company. The company will then file a 30-day notice with the Securities and Exchange Commission of the takeover, and the target company will then need to choose defensive strategies or risk the loss of their authority.

When a company is considering acquisitions or takeovers as a part of their business planning strategy, they may often benefit by consulting with a business and commercial law attorney, as this information does not reflect direct legal advice. An attorney may help by completing a thorough analysis of the target business’s practice and finances in order to make a recommendation. An attorney may help draft all necessary paperwork and documents that will be needed to finalize the acquisition of the target company.

Source: The Houston Chronicle , “Takeover Vs. Acquisition“, November 19, 2014


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