Hostile Takeover

A hostile takeover is the acquisition of a company against the will of its management. The buyer approaches the shareholders directly instead of reaching an agreement with management. Such takeovers are usually conflict-heavy and often trigger defensive measures. It is typical of listed companies with a broad free float, where a bidder can reach many shareholders independently of management. What matters is whether enough shareholders are willing to sell. An opposing majority shareholder can prevent success.

In Germany a public takeover offer follows a regulated process covering the offer document, secured financing and the consideration offered. The management and supervisory boards comment on the offer. Management cannot freely frustrate it. Available defensive measures depend on legal limits and the approvals required. Shareholders primarily assess whether the price, form of payment and chances of success are more attractive than the company continuing independently.

Practical responses include seeking a friendly competing bidder, persuading shareholders with a convincing standalone strategy and explaining why the price may be inadequate.

Anyone controlling at least 30 percent of voting rights must generally make a mandatory offer, unless an exception or exemption applies. Existing stakes and possible further purchases therefore belong in the financing plan. A hostile approach is further complicated by the absence of access to due diligence. Preparation is decisive for the bidder, because without access to internal documents it depends entirely on publicly available information and can assess risks less precisely. That uncertainty must be reflected in its pricing. The effect on the target itself also deserves thought, because a takeover battle lasting months unsettles customers, suppliers and employees, so the value acquired can fall before the takeover is even completed.

Note: This explanation is for general information only and does not constitute legal advice. The legal position depends on the individual case and may change with new legislation or case law. For a binding assessment, please consult a qualified lawyer.