Hostile takeover strategies: Meaning, examples, and consequences

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Hostile takeover strategies: Meaning, examples, and consequences

By Seb Constantine
October 19, 2022
9 min read

Recent data indicates a surge in hostile takeover activity. This is due to a period of economic turmoil favorable for entities seeking to capitalize on distressed companies. Such activity was observed after the 2008 financial crisis and is increasing now in the post-COVID-19 era. 

In this article, we explore hostile takeovers, delve into strategies employed by the companies, and examine real-world examples.


  • A hostile takeover occurs when a company is acquired against its will through aggressive tactics, while friendly takeovers involve mutual consent and cooperation between the acquiring and target companies.
  • Hostile takeovers are driven by various reasons, such as strategic fit, cost savings, increasing or diversifying market share, and financial gain.
  • Hostile takeover strategies include tender offers and proxy votes.
  • Defense strategies are poison pills, supermajority amendments, crown jewels, golden parachutes, Pac-Mans, greenmails, and employee stock ownership programs (ESOPs).
  • Consequences of hostile takeovers for the target include loss of control, uncertainty, job losses, shareholder value impact, legal and regulatory issues, and reputational damage.
  • Consequences of hostile takeovers for the acquiring company include financial burden, integration challenges, market perception issues, and employee integration and retention problems.

What is a hostile takeover?

The meaning of hostile takeover is embedded within its name. More specifically, a hostile takeover refers to the acquisition of a target company by another entity in a hostile manner.

Unlike a friendly takeover, where the target company’s management and board of directors are willing participants, a hostile takeover involves aggressive strategies and occurs against the will of the target company’s management.

There are several reasons for conducting a hostile takeover:

  1. Strategic fit. The acquiring company sees value in the target company’s assets that would complement its own operations.
  2. Synergies and cost savings. Merging with the target company can lead to operational efficiencies and cost reductions.
  3. Market share expansion. Acquiring the target company helps increase market share and access to new markets or customers.
  4. Financial profit. The acquiring company believes the target company is undervalued and can generate financial returns.
  5. Competition. Hostile takeovers can be used to remove a competitor to strengthen market position.

Hostile takeover strategies

Hostile takeover strategies refer to the various tactics and approaches employed by an acquiring company or activist shareholders to gain control of a target company.

The most common strategies are described below.

1. Tender offer

The hostile tender offer strategy revolves around company A, the would-be acquirer, making an offer to purchase shares of company B at a price exceeding the current market value. The objective is to obtain a controlling stake in company B by acquiring enough shares to secure a majority vote.

The success of tender offers depends on the acquirer’s ability to purchase enough shares. If the number of the target company’s shareholders willing to sell their shares is insufficient, company A will withdraw the tender offer.

However, tender offers require a substantial amount of time and effort. For instance, under U.S. law, a hostile acquirer must disclose the offer’s terms, sources of funding, and proposed plans in the event of a successful takeover. Additionally, shareholders are subject to specific deadlines for making their decisions.

2. Proxy fight

The aim of a proxy fight is to gather enough shareholder support to replace the target’s board of directors with individuals who are more favorable to the acquisition. Therefore, proxy fights revolve around influencing the shareholders’ votes through various means, such as communication campaigns, proxy solicitations, and public appeals. 

The strategy is the following:

  1.  The existing shareholders grant their voting rights to a proxy, typically appointed by Company A.
  2. This proxy casts votes on behalf of shareholders during the target company’s shareholders’ meeting, with the goal of securing a majority vote and electing new directors who support the acquisition.
  3. Successful proxy fights result in the replacement of existing board members with those favoring the takeover. 
  4. These newly appointed directors can then vote in favor of the acquisition, providing Company A with control over the target company’s operations and assets.

Hostile takeover defenses

Here are the primary defensive strategies against a hostile takeover bid that target companies may adopt:

  1. Poison pill defenses. The tactic artificially reduces the target company’s stock’s attractiveness. Consequently, the potential acquirer has to acquire a much larger number of shares to gain a controlling stake. Therefore, the acquisition increases costs and becomes more complicated. As a result, the acquiring company is expected to abandon the hostile takeover attempt.
  2. Supermajority amendment. This method of fending off hostile takeovers requires a substantial majority (sometimes up to 90%) of the shareholders to vote in favor of the acquisition. Due to the high threshold requirements, obtaining a supermajority becomes more difficult, which can slow down decision-making.
  3. Crown jewel defense. In this anti-takeover scenario, a target company sells the most valuable assets, such as intellectual property, patents, or trade secrets, to a friendly third company or white knight. This makes the company significantly less attractive and, as a result, blocks hostile takeover attempts.
  4. Golden parachute defense. This hostile takeover technique aims at increasing the overall acquisition cost. A golden parachute is a contract between a target firm and top-level executives that guarantees considerable financial compensation or substantial benefits to key management team members if a hostile takeover occurs and the senior staff leaves the acquired organization.
  5. Pac-Man defense. This defense strategy is based on the principle, “Eat or be eaten.” In this strategy, a target company acquires the shares of the potential acquirer, effectively reversing the takeover attempt. The idea is that the acquiring company, facing the risk of losing its own business, will abandon its intentions. However, the strategy can be costly, and companies with limited resources may need to consider alternative defense takeover techniques.
  6. Greenmail. This technique involves the target company purchasing its own shares back from a hostile bidder at a premium cost, often higher than the market price. This usually forces the acquiring company to terminate the takeover. However, while it provides short-term relief for the target company, it can be costly and controversial, as it rewards the aggressor.
  7. Employee stock ownership program (ESOP). This involves allocating company shares to employees and granting them company ownership. By increasing employee ownership, the target company creates a strong internal support system against a hostile takeover. Employees, as shareholders, have a vested interest in preserving the company’s independence, making it more challenging for an external acquirer to gain control.

Hostile takeover examples

Below are three examples of hostile takeovers and strategies hostile bidders employed to gain control over target companies.

1. Kraft Foods Inc. and Cadbury Plc.

In September 2009, Kraft Foods Inc., an American food manufacturing and processing conglomerate, offered Britain’s confectionery company Cadbury Plc. $16.3 billion for a takeover. However, the Cadbury chairman rejected the deal.

Cadbury’s hostile takeover defense team marked a proposal from Kraft Foods Inc. as unattractive and underestimated. Even the British government got involved in the conflict, protesting against any proposal disrespecting the renowned company. Later it even revised the rules for acquiring British organizations by foreign companies. 

Even despite that, Kraft didn’t back down and increased its offer to $19.5 billion. As a result, Kraft Foods completed the takeover in January 2010.

2. InBev and Anheuser-Busch

In June 2008, InBev, a Euro-Brazilian beverage company, launched its unsolicited bid for Anheuser-Busch, America’s largest brewery. InBev offered $65 per share in a deal valued at $46 billion.

The takeover soon turned hostile as InBev and Anheuser-Busch filed lawsuits and accusations against each other. So, following the proxy battle strategy, InBev even filed a lawsuit to fire the Anheuser-Busch board of directors to gain control over the company.

In the end, InBev increased its offer to $70 per share ($52 billion), “convincing” the target’s shareholders to accept the deal.

3. Sanofi-Aventis and Genzyme Corporation

In 2010, Sanofi-Aventis, a French pharmaceutical and healthcare company, decided to acquire Genzyme Corporation, an American biotechnology company. Sanofi-Aventis’ goal was to generate valuable technology and research to jumpstart entering new markets. At the time, Genzyme had several drugs for treating rare genetic ailments developed and had several other drugs in the development pipeline.

After Genzyme’s rejection, Sanofi-Aventis resorted to a hostile takeover using unethical methods. Simply put, the CEO of Sanofi-Aventis began courting Genzyme’s major shareholders to win support for the acquisition.

This hostile takeover approach worked though, and Sanofi-Aventis bought Genzyme in a sweetened $20.1 billion cash deal nine months after the first offer.

Hostile takeovers vs. friendly takeovers

Let’s now compare the key differences between hostile and friendly takeovers.

Acquisition method

  • Hostile takeovers: the acquirer directly approaches the target company without prior agreement or consent.
  • Friendly takeovers: the acquirer and target company mutually agree on the acquisition terms and negotiate the deal.

Attitude of a target company

  • Hostile takeovers: the target company is resistant to the takeover attempt and may actively oppose it.
  • Friendly takeovers: the target company is open to the acquisition and willing to cooperate with the acquirer.

Negotiation process

  • Hostile takeovers: limited to minimal negotiation as the acquirer bypasses the target company’s management.
  • Friendly takeovers: extensive negotiations and discussions take place between the acquirer and the target company.


  • Hostile takeovers: can be lengthy due to resistance and legal challenges.
  • Friendly takeovers: generally faster and smoother due to mutual consent and cooperation.


  • Hostile takeovers: the acquirer may face difficulties in securing financing if the target company is unwilling to cooperate.
  • Friendly takeovers: the acquirer typically has secured financing in advance, which helps facilitate the transaction.

Impact on culture and employees

  • Hostile takeovers: often leads to uncertainty, anxiety, and potential job losses for employees of the target company.
  • Friendly takeovers: collaboration and integration efforts focus on minimizing disruption and ensuring a smooth transition for employees.

Likelihood of success

  • Hostile takeovers: the success rate may vary, but hostile takeovers face more obstacles and uncertainty.
  • Friendly takeovers: higher likelihood of success as both parties are aligned and working towards a common goal.

Consequences of hostile takeovers

Hostile takeovers have far-reaching consequences for both the target and acquiring companies.

For the target company

  • Loss of control. The existing management team and board of directors may be replaced, leading to a loss of control over the company’s strategic decisions and direction.
  • Uncertainty and disruption. The hostile takeover process can create a period of uncertainty and disruption within the target company, affecting employee morale and productivity.
  • Job losses and restructuring. The acquiring company may implement cost-cutting measures, resulting in job losses and restructuring efforts within the target company.
  • Shareholder value impact. The value of the target company’s shares may fluctuate during and after the takeover attempt, potentially leading to losses for existing shareholders.
  • Legal and regulatory issues. Hostile takeovers may face legal and regulatory scrutiny, potentially resulting in investigations or compliance challenges.
  • Reputation and branding. The target company’s reputation and branding may be impacted by the hostile takeover attempt, affecting customer relationships and market perception.

For the acquiring company

  • Financial burden. The acquiring company may face a significant financial burden due to the cost of the acquisition, including the purchase price, potential legal fees, and integration expenses.
  • Integration challenges. Integrating the target company into existing operations can be complex and time-consuming, requiring careful planning and coordination to achieve synergies and operational efficiency.
  • Market perception. The acquiring company’s reputation and market perception can be influenced by the manner in which the hostile takeover is executed, potentially affecting investor confidence and stakeholder relationships.

Employee integration and retention. Ensuring a smooth integration process and retaining key talent from the target company can be a challenge, affecting the overall success of the acquisition.


In simple terms, a hostile takeover is when one company tries to acquire another company without the approval or agreement of management or the board of directors.

In a hostile takeover, the acquiring company seeks to gain control of the target company without the consent or cooperation of management or the board of directors. It typically involves direct communication with the target company’s shareholders, bypassing the traditional negotiation process.

The acquiring company may employ various tactics, such as tender offers or proxy fights.

Yes, hostile takeovers are generally legal. However, legal complications can arise due to the tactics employed by both the acquiring and target companies during the takeover battle.

In a hostile takeover, the primary beneficiary is typically the acquiring company and its shareholders. The acquiring company benefits by gaining control of the target company’s assets and market share, potentially leading to increased profitability.

Shareholders of the target company may benefit if the takeover offer boosts their company’s share price.

To avert a hostile takeover, a target company can employ various strategies. These include implementing anti-takeover defenses, seeking white knights as friendly acquirers, or appealing to shareholders to gain their support.

Yes, Musk’s acquisition of Twitter was considered a hostile takeover. On April 14, 2022, Musk made an unsolicited offer to purchase the company. After which, Twitter’s board implemented a poison pill defensive strategy to prevent the acquisition.
However, on April 25, the board unanimously agreed to accept Musk’s buyout offer of $44 billion.

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