Who benefits from take over resistance tactics? Essay

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Who benefits from take over resistance tactics?
According to the finance literature, a takeover is a process whereby a firm acquires another firm, resulting in a change of the controlling interest of the acquired firm. Takeovers can occur through acquisitions, proxy contests and going-private transactions. They can be friendly when the management of the target firm is receptive to the bidder offer or they can be hostile when target firm managers resist takeover attempts by using defensive tactics. According to Ross et al (2010), takeovers can result in change of firm policies, layoffs, terminations, or overhaul of business operations.
To analyze who benefits from a takeover resistance tactic, we should first examine the reasons or …show more content…

Other tactics after the company in in play include greenmail and standstill agreement, white knight and white squire, recapitalization and repurchases where managers issue debt to repurchase shares raising the market share price, making it less attractive to the bidder; exclusionary self-tenders and asset restructuring.
These tactics are built by management for self-protection reasons, being severe, (blocking takeovers) or soft tactics with no substantial impact on the offer price. However, empirical evidence shows that although manager’s defensive tactics may sometime rarely shareholders by increasing wealth, in general, these tactics do not have a positive impact in the share price of the target firm. According to DeAnglelo and Rice (1983) cited in Ruback (1987.p56-57), they found no evidence of share price reaction to adoption of corporate charters amendment when analyzing 53 firms using staggered boards as well as the effect of super majority provision.
Ho (1986) cited in Ruback (1987), found no evidence of existence of abnormal return for a sample of 23 poison pills. This conclusion is also consistent with findings of Kidder, Peabody and Company for a sample of 167 poison pills where no stock price change was observed.

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