Society/Trust/RWA/Section 8- NGO
As per the Regulation 2(1) (b) of the Takeover Code, SEBI specifies the term Takeover as an “acquisition” as “directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target company”
Key elements of a takeover
It’s an attempt to take over the control of a company which is already registered.
The shares are purchased from the shareholders of a company to an extent of controlling the interest and thereby gaining control.
Types of takeovers as per law
Friendly takeover – Negotiation happens between the promoters of a company and the investors in a friendly manner to further some common objectives as per Section 395 of the Companies Act, 1956.
Bail-out takeover – Takeover of a financially sick company by a finically well-off company to bail them out from losses as per Sick Industrial Companies (Special Provisions) Act, 1985
Hostile takeover where the investors actively pursue the takeover without the knowledge of other company attempted through a public tender offer. as per SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997.
Corporate Raiders – Making an offer to shareholders after the board of directors have refused or by completely bypassing them.
Types of takeovers as per business context
Horizontal Takeover – Happens between companies from the same industry. The main purpose is increasing the market share or achieving economies of scale. Example Lipton India and Brooke Bond, Bank of Madura with ICICI Bank.
Vertical Takeover – Happens between companies operating at different stages of production within the same industry. Example is Tata Motors acquiring 80% stakes in Trilix Srl
Conglomerate takeover – Happens between companies operating in totally different industries. The main purpose of this kind of takeover is diversification. Example Reliance Industries (RIL) taking over Reliance Petroleum (RPL)
Benefits of a Takeover
Downsides of a Takeover
Terms in Use
A person who, directly or indirectly, acquires the share or the voting right whether by himself or through or with persons acting in concert or control over a target company.
Target Company A company that is listed on any stock exchange and whose shares or voting rights are to be acquired.
Any person who is in control of the target company named in the offer document or shareholding pattern.
The right to directly or indirectly appoint a majority of directors on the Board of the target company, control management or policy decisions affecting such company.
Is an acquirer directly acquiring shares, voting rights, or control of the targeted company.
Where the acquirer indirectly exercises or direct the exercise of voting rights of a target company, the acquisition of which would otherwise attract the obligation of making an open offer as per regulations
It’s an opportunity to exit their investments in no inferior terms viz a viz their initial investment. It lays down the norms like the pricing, timing, manner, even exemption or relaxation
Mandates To Be Met
Defense against hostile takeover
Introduction of shareholders’ right plans where the targeted company dilutes its shares such that the hostile bidder cannot obtain a controlling share without massive expenses.
Flip-in pill where the company issues preferred shares that only existing shareholders can buy thereby diluting the hostile bidder’s potential purchase.
Segregates the board of directors into groups and putting a handful of them in one election delaying the entire board to be reelected.
White Knight defense where the company may seek the help of a friendlier firm and offer them to buy controlling shares before the hostile bidder does.
Crown jewel defense where target company sells off most attractive assets to a friendly 3rd party or spin off the valuable assets in a separate entity.
Safe harbours where a target company will acquire a troublesome firm in order to make acquisition potentially unattractive.
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Mergers, Acquisitions and Take-overs
The firm devotes sufficient manpower and resources to matchup to constantly changing macro environment related to Merger and Acquisition (M&A) scene in India. MUDS has played an active role facilitating Mergers and Acquisition and help ensure complete compliance with the takeover code.
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