What It Is, How It Works, and Examples [Video]

A hostile takeover happens when an entity takes control of a company without the knowledge and against the wishes of the company’s management. A hostile takeover is an acquisition strategy requiring that the entity acquire and control more than 50% of the voting shares issued by the company. It is considered bad business etiquette.

A hostile takeover allows the new majority shareholder(s) to control the acquired business. The company being acquired in a hostile takeover is called the target company, while the one executing the takeover is called the acquirer. Reasons that hostile takeovers occur, from the acquiring party’s point of view, often coincide with those of any other acquisition or merger, such as:

Hostile takeovers are generally initiated in two ways:

To deter unwanted takeovers, companies may have preemptive defenses or employ reactive defenses to fight back. Some of these defenses are:

Differential Voting Rights (DVRs)

To protect against hostile takeovers, a company can establish stock with differential …