WallStreetMojo

WallStreetMojo

WallStreetMojo

MENUMENU
  • Free Tutorials
  • Certification Courses
  • 250+ Courses All In One Bundle
  • Login
Home » Investment Banking Tutorials » Mergers and Acquisitions Tutorials » Friendly Takeover

Friendly Takeover

A friendly takeover is where the target company agrees to the acquisition offer in a peaceful manner and in this case the takeover is subject to the approval of the shareholders of the target company as well as that of the regulators to check if the deal complies with the antitrust laws.

What is Friendly Takeover?

Friendly Takeover is a type of takeover that is very friendly in nature as the management of the acquired company, as well as management of the target company, agrees to the terms and conditions of the takeover, and takeover is done without any difficulty, arguments, and fights. An acquirer doesn’t have to do any plotting or make any strategies against the target company in order to acquire the same.

Therefore in literal terms, we could say that when the takeover is with the consent of the board of directors and shareholders of the target company, then the takeover is called a “Friendly Takeover.”

Friendly Takeover

Example #1 – Friendly Takeover Examples

Let’s assume there is a company called XYZ who is interested in buying a majority in company ABC. Company XYZ makes a plan to approach company ABC’s board of directors with a potential bid. Company ABC’s board of directors would then discuss the bid or votes on the bid. If the company ABC management evaluates that the deal is beneficial to the company, they will accept the offer and recommend the deal to shareholders as well. After all the approvals from a board of directors, shareholders, and other regulatory authorities involved, the deal will be finalized.

Example #2 – Johnson & Johnson Takeover of Crucell

source: jnj.com

Pharmaceutical and health care giant Johnson & Johnson announced the successful completion of a Friendly Takeover of Dutch vaccine maker Crucell which employs 1,300 people, produced more than 115 million doses of vaccine in 2009 for distribution in about 100 countries, for about 1.75 billion euros ($2.37 billion). Johnson & Johnson and Crucell jointly announced that Johnson & Johnson has completed the tender offer for Crucell. Johnson & Johnson, which employs 114,000 people, has said it intends to retain Crucell’s management and staff and to keep the headquarters at Leiden in the western Netherlands. Johnson & Johnson now owns more than 95 percent of Crucell’s capital. The European Commission authorized the takeover seeing no competition problems.

Popular Course in this category
Sale
Investment Banking Training (117 Courses, 25+ Projects)
4.9 (831 ratings)
117 Courses | 25+ Projects | 600+ Hours | Full Lifetime Access | Certificate of Completion
View Course

Example #3 – Facebook & WhatsApp Deal

Facebook takeover to WhatsApp is another big example of a friendly takeover where Facebook bought WhatsApp in $19 Billion.

source: reuters.com

Why Friendly Takeover Occur?

The Friendly Takeover has many benefits that it offers to the target company. When a target company sees that the benefit they will have after this takeover is enough to trade with their current business, they go for or agrees to the deal that an acquirer offer. The biggest benefit that is being offered to the target company by this takeover is the price per share, which is often better than the current market price.

  • The target company might receive other benefits as well in addition to the better per share price that includes better opportunities to expand the business, to explore the different markets, expansion in different product lines, etc.
  • It is very important to note that there is always a country’s regulatory body involved in takeover whose approval is mandatory for the takeover to happen.
  • In case the regulatory body doesn’t approve the takeover terms or feel that the takeover would be harmful in any circumstances, it would not happen even after both the acquirer and the target company is in agreement to the takeover.

Advantages

There are many advantages associated with Friendly Takeover:

  • In this takeover, both the acquirer and target company takes part in designing the structure of the deal to their mutual satisfaction.
  • In this takeover, the target company doesn’t have to face or experience any annoying disputes or losses that may occur because of other types of takeovers, as in the case of a Hostile takeover.
  • Generally, a better price per share is another advantage of a friendly takeover.

Friendly Takeover vs. Hostile Takeover

Unlike a Friendly Takeover, In a Hostile takeover, the target company doesn’t want the acquirer to acquire it.

When the takeover is without the consent of the board of directors of the target company. It is hostile on the board of the directors of the target company; then, the takeover is called a “Hostile Takeover.”

This type of takeover, the acquirer will directly go to the shareholders of the company to acquire the shares of the target company without letting the management of the target company know about such actions.

An acquirer may proceed with the hostile takeover using any of the following strategies:

  • Tender Offer: In a tender offer, the acquirer company makes a public offer to purchase shares from the shareholders of the target company at a price more than the current market price.
  • Proxy Fight: In proxy fights, the acquirer company makes the shareholders of the target company agreed to use their proxy votes in a way that is in favor of the acquirer company so that they could make the desired changes in the target company or in its management.

In the case of a hostile takeover, the target company can use several mechanisms to defend itself against a hostile takeover. This mechanism could be a poison pill, the crown jewel defense, Pac Man defense, etc.

Recommended Articles

This article has been a guide to a What is Friendly takeover? Here we discuss the definition of friendly takeover along with examples, when does it occur, advantages, and the difference between Friendly Takeover and Hostile Takeover. You may also look at the following articles on Investment Banking to enhance your knowledge further.

  • Reverse Takeover
  • What is Dawn Raid Takeovers?
  • Greenmail
  • Amalgamation vs. Merger Differences
0 Shares
Share
Tweet
Share
Primary Sidebar
Footer
COMPANY
About
Reviews
Contact
Privacy
Terms of Service
RESOURCES
Blog
Free Courses
Free Tutorials
Investment Banking Tutorials
Financial Modeling Tutorials
Excel Tutorials
Accounting Tutorials
Financial Statement Analysis
COURSES
All Courses
Financial Analyst All in One Course
Investment Banking Course
Financial Modeling Course
Private Equity Course
Venture Capital Course
Excel All in One Course

Copyright © 2021. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. CFA® And Chartered Financial Analyst® Are Registered Trademarks Owned By CFA Institute.
Return to top

WallStreetMojo

Free Investment Banking Course

IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials

* Please provide your correct email id. Login details for this Free course will be emailed to you

Book Your One Instructor : One Learner Free Class
WallStreetMojo

Free Investment Banking Course

IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials

* Please provide your correct email id. Login details for this Free course will be emailed to you

Let’s Get Started
Please select the batch
Saturday - Sunday 9 am IST to 5 pm IST
Saturday - Sunday 9 am IST to 5 pm IST

This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy

Login

Forgot Password?

New Year Offer - Investment Banking Training (117 Courses, 25+ Projects) View More