Takeover Attempts Research Articles

Counter-hostility as defensive strategy in a hostile takeover: The acquisition of Hillards supermarket chain by Tesco

Hillards was a retail supermarket firm based in Yorkshire in the North of England between 1885 and 1987, when it was subject to a hostile takeover from Tesco. Using archival and interview data this article explores how Hillards pursued a sensemaking process to engage in a strategy of counter-hostility to the takeover attempt. Ultimately the firm was acquired by Tesco. By examining Hillards’ defence strategy, this paper contributes to the understanding of the nature of strategy-making within a takeover. The article shows how in defeat Hillards was able to secure a partial victory in the form of a substantially increased cost of acquisition, so maximising shareholder value. This contributes to the history of the supermarket sector, and the history of family firms in the UK.

The collective security dilemma of preemptive strikes

Players who are targets of potential raids can sometimes preempt some of these raids and neutralize the raiders. These threatened players have different values to the attackers as raid targets, and they act independently of each other and sometimes sequentially. The order in which the threatened players make their neutralization decisions turns out to be critical to the number of raids and the resulting probability of being attacked. The lowest number of raids results when the threatened players act in ascending order of attractiveness as targets for preemptive strikes. The analysis characterizes game-theoretic equilibrium as a function of action sequencing. It also discusses variations in the game situation, such as if the same threatened player can make multiple preemptive strikes, or if threatened players all act simultaneously rather than in a sequential order. The results are relevant in many contexts, including cybercrime, military threats from revisionist states, international terrorism, sabotage among employees in firms and other organizations, and defense of corporations against hostile takeover attempts.

Study on the Anti-Takeover Defence Strategies Used by the Corporates at the Time of Mergers & Acquisitions

Mergers and acquisitions (M&A) have become a common strategy for companies looking to grow and expand their operations. However, the potential benefits of M&A can also attract unwanted attention from potential acquirers, which can lead to hostile takeover attempts. To protect themselves from hostile takeovers, companies often implement anti-takeover defense strategies. Anti-takeover defense strategies refer to a range of defensive tactics that target companies can employ to deter or prevent hostile takeovers. These strategies can take various forms, including structural defenses, governance defenses, and financial defenses.
 This research paper examines anti-takeover defense strategies in mergers and acquisitions (M&A) using secondary data sources. The paper provides an overview of the various types of anti-takeover defense strategies that are commonly used by companies, including structural, governance, and financial defenses. The paper also analyzes the various anti-takeover defense strategies adopted in protecting shareholder value and limiting competition. The regulatory frameworks governing anti-takeover defense strategies in different jurisdictions are also explored, including the United States, United Kingdom, European Union, and Japan.
 The findings of this study indicate that the use of anti-takeover defense strategies can be effective in protecting shareholder value, but may also limit competition and potentially result in lower acquisition premiums. The paper concludes by discussing the implications of these findings for companies involved in M&A transactions, and the need to balance the protection of shareholder interests with the potential benefits of being an attractive target for acquisition.
 Overall, this research provides a comprehensive analysis of the complex landscape of anti-takeover defense strategies in M&A transactions, based on secondary data sources. The findings of this study contribute to the understanding of the role of anti-takeover defense strategies in M&A transactions and the considerations that must be taken into account by companies when implementing these strategies.

Driving Aggressively or Conservatively? Investigating the Effects of Automated Vehicle Interaction Type and Road Event on Drivers' Trust and Preferred Driving Style.

This study aimed to investigate the impact of automated vehicle (AV) interaction mode on drivers' trust and preferred driving styles in response to pedestrian- and traffic-related road events. The rising popularity of AVs highlights the need for a deeper understanding of the factors that influence trust in AV. Trust is a crucial element, particularly because current AVs are only partially automated and may require manual takeover; miscalibrated trust could have an adverse effect on safe driver-vehicle interaction. However, before attempting to calibrate trust, it is vital to comprehend the factors that contribute to trust in automation. Thirty-six individuals participated in the experiment. Driving scenarios incorporated adaptive SAE Level 2 AV algorithms, driven by participants' event-based trust in AVs and preferences for AV driving styles. The study measured participants' trust, preferences, and the number of takeover behaviors. Higher levels of trust and preference for more aggressive AV driving styles were found in response to pedestrian-related events compared to traffic-related events. Furthermore, drivers preferred the trust-based adaptive mode and had fewer takeover behaviors than the preference-based adaptive and fixed modes. Lastly, participants with higher trust in AVs favored more aggressive driving styles and made fewer takeover attempts. Adaptive AV interaction modes that depend on real-time event-based trust and event types may represent a promising approach to human-automation interaction in vehicles. Findings from this study can support future driver- and situation-aware AVs that can adapt their behavior for improved driver-vehicle interaction.

Why did states fail to take control over city-owned airports? A tale of three cities

To date, little research has been conducted on the change in the airport governance structure. This study analyzes and compares three recent state airport takeover attempts based on a qualitative case study approach. The primary purposes of this research are to describe the processes of state attempted airport takeovers, to identify the key motivating factors of and arguments against state airport takeover attempts, and to present the main issues of transitioning to a new governance structure. The study concludes with policy implications for future airport governance reforms.

The economics of prepackaged bankruptcy

The economics of prepackaged bankruptcy

Inter-colony fights in Tetragonula stingless bees result in temporary mixed-species worker cohorts

Two stingless bee species, Tetragonula carbonaria and Tetragonula hockingsi, engage in extreme inter-colony fights, both within and between species. Inter species fights can result in one species taking over the nest of the other. Following successful takeovers, brood from the previous colony could be retained and become workers, but this has yet to be tested. We first tested whether T. carbonaria callows are accepted when introduced into a different conspecific nest and found that they are indeed accepted as normal workers. This suggested that mixed species cohorts might be expected after a hive takeover. We assessed this in a managed T. carbonaria hive, fitted with an observation window that was subject to multiple takeover attempts. Using microsatellite genotyping, we established that multiple different colonies (of both species) attacked the observation colony over 63 days, resulting in a catastrophic collapse of the nest. Our observations inside the hive during these inter-colony invasions revealed no evidence of resource robbing, adding further support to the hypothesis that fighting behaviour in these species has the primary goal of taking over the nest. Newly emerged callows were ejected by invaders, predominantly during the initial few days of fighting. The ejection of callows ceased; however, shortly after each takeover attempt, and, following this, newly emerged callows were accepted as workers. These findings add new evidence that the invading colony co-exists with workers from the previous brood following a takeover, but only until the last of that cohort dies.

Stock price crash risk and the adoption of poison pills: evidence from Brazil

PurposeThe purpose of this paper is to examine the effect of stock price crash risk on the adoption of poison pills.Design/methodology/approachThe authors estimate logit and probit regressions. Their sample includes 185 Brazilian public firms for the period 2010–2018. Following previous studies, the authors use the negative skewness of firm-specific weekly returns and the down-to-up volatility of firm-specific weekly returns as measures of firm's stock price crash risk. As proxies of poison pills, the authors employ the “conventional” poison pills in their baseline models and the “eternity” poison pills, which prevent the removal of poison pills from bylaws, in additional models.FindingsThe authors find that stock price crash risk measures are not associated with poison pill adoption. However, although stock price crash risk does not lead to poison pill adoption as a complementary corporate governance mechanism that protects firms against hostile takeover attempts, further results show that managers do not draw on stock price crash risk as a pretext to entrench themselves. Additional analyses also highlight that CEO power seems to play a role in moderating the relationship between stock price crash risk and eternity poison pill adoption.Originality/valueThe authors contribute to the literature on stock price crash risk, which calls for research in international contexts to better understand the effect of stock price crash risk on country-specific idiosyncratic features. The authors discuss a controversial anti-takeover mechanism that has been debated by Brazilian policymakers.

Integrated case for COVID-19: hospitality management, finance, marketing, strategy, and sustainability – “Good ‘Ol Camp Teddy amidst the COVID pandemic”

Theoretical basis Later in the discussion, the options for long run strategy in dealing with a possible takeover offer and other strategic options can be discussed by the class. Lack of familiarity by students with the role of the outside potential acquirer of the camp (in this case, a hotel chain) and the lack of familiarity with the role of an investor who is a family investor, who may wish to sell stock and use the proceeds for another purpose, or a small investor who invests because he or she uses the camp and takes advantage of the stockholder’s discount will probably preclude role playing, except in executive MBA classes where students have sufficient experience in possible takeover situations or in investment management, Emphasis should probably be placed on discussing the major issues, such as social and cultural issues and on marketing and public relations issues and on financial issues, including the options available in the event of a possible takeover effort. All of these issues are impacted fully by the COVID-19 pandemic. Research methodology Instructors will need to play an active role in teaching this case. It is recommended that the instructor give a short lecture or discussion at the beginning as to how a camp such as Camp Teddy functions. The authors recommend that the instructor then begin the case discussion by asking students questions about such issues as social and cultural issues and marketing and public relations issues. Case overview/synopsis Camp Teddy is a seasonal camp for families in rural Connecticut adjacent to New York City and suburbs in New York and Connecticut. It is technically a for-profit organization but operates more like a nonprofit organization because many of the campers own shares and have used the camp sometimes for several generations. The camp has traditions that are liked by many of the shareholders and campers. Although net income has increased in the past year, there does not seem to be enough funds to support necessary capital expenditures to improve facilities for the future. The largest stockholder has recently died. His immediate heirs’ control 300 of the 1,000 shares and other family members control 400 shares with the remaining 300 shares in the hands of small shareholders, many of whom use the camp each summer. A large hotel chain is interested in possibly acquiring the camp through a buyout or perhaps a hostile takeover, with a potential large gain to shareholders. The board of directors must consider a number of issues to insure good occupancy of the camp in the future and must decide what to do about a potential takeover attempt. Complexity academic level This case can be used in several courses, including investment management, hospitality management, corporate finance and business strategy. There are ethical and societal issues in the case, so that the case might also be used in courses looking at business, environment or business ethics. The case is best used at the graduate level, but it might be suitable for some advanced undergraduate courses.

Hostile Takeovers: Desirable or Dangerous? A Survey Study into the Circumstances Under Which Hostile Takeovers in the Netherlands Are (Un)Permissible

Abstract A number of recent hostile takeover attempts in The Netherlands have triggered the discussion in the Netherlands on the circumstances under which protection of the target company against a hostile takeover should be justified or not be justified. To answer this question, 21 experts involved in mergers and acquisitions from various angels on the highest (management) level, were selected to participate in a survey investigation combining open questions and giving scores for submitted factors. The outcomes show that the participants advocate non-protection in case of relatively high performance of the bidding company, new value creating opportunities a non-responsive board of the Target with personal interest of the board, and cash payment for the target. They are in favor of protection in case of takeover attempts that incur personal board benefits of bidder or target, intended debt push down financing, and in case of considerable societal risks and consequences.

Narrative Building in State Education Intervention: Framing the Takeover Attempt of Houston Independent School District

This case study uses the approach by the Texas government to attempt a state takeover of Houston Independent School District (HISD) to examine the impact of framing on awareness and acceptance of executive action. This work extends recent studies in Georgia and Massachusetts that find stakeholder relationships, the role of Republican governors, and assigning blame as key components of takeover analysis. Using framing analysis, this case study analyzes the impact that framing the takeover action and approach has on these relationships. These findings present an understanding of how narrative construction makes an executive action consistent with administrative and political power to gain acceptability.

THE HUNGARIAN BEER HALL PUTSCH ― THE SZEMERE–BOBULA–ULAIN COUP PLAN, 1923

The years following World War One belonged to a crisis period when political extremities strengthened throughout Europe. In Hungary, it was also the peak of the radical right wing, and some radical political circles even planned coups d’etat against the conservative government that was working on the political consolidation of Hungary. A group of radical right-wing politicians led by Member of the Parliament Ferenc Ulain who had been in confidential contact with German radical right-wing movements and politicians (Adolf Hitler and General Erich Ludendorff among them) decided to execute a takeover attempt in 1923, with the help of Bavarian paramilitary movements, harmonizing their plans with the Munich Beer Hall Putsch being in preparation. The present research article makes an attempt to reconstruct this strange chapter of Hungarian political history. Keywords: radical right-wing organisations, coup d'etat, political violence, irredentism, anti-Semitism.

Larsen & Toubro Infotech’s Hostile Bid for Mindtree Ltd.: Much Ado About Nothing! A Teaching Case

This article tries to understand and analyse the recent acquisition of Mindtree Ltd. by the corporate conglomerate giant Larsen & Toubro (L&T). L&T Infotech (LTI), which looks after the information technology (IT) business of the L&T group made a hostile bid for Mindtree Ltd., one of India’s leading and fastest growing infotech companies in March 2019. The case goes on to analyse the deal and delves into the reasons for the deal turning hostile. The objective of the case study is to understand the concept of hostile takeovers and the business environment that augur acquisitions. The second part of the article tries to focus on anti-takeover tactics, which the company adopts to avoid the takeover attempt. Here, Mindtree’s decision of share buyback, immediately after L&T’s bid, has been examined. Two perspectives have been studied here—one from the point of view of the promoters of Mindtree, and the other from the point of view of investors. There have been certain very interesting and jocular exchanges of words between the promoters of Mindtree and LTI1 during the whole phase of takeover, which put the focus on the human element in acquisitions. The business environment and industry analysis have been conducted to understand the nature and circumstances of the deal. Legalities of the acquisition and dominant player misuse have also been examined. LTI’s take on the acquisition was very clear. For them, it was a pure business deal. They were on the path for fast growth, which Mindtree would help them achieve. Certain sectors such as Retail, Consumer Packaged goods, Media and Technology are underachieved for LTI where Mindtree has a formidable presence. Mindtree would help LTI explore geographies in Europe that so far were unexplored. However, for the promoters of Mindtree, this bid for takeover became an emotional issue. It all started when one of the non-executive directors of Mindtree itself—V. G. Siddharth—came up to LTI and offered his shareholding of 21 per cent in Mindtree. LTI grabbed this offer and went on to announce that it would acquire a total of about 60 per cent in the company, which made the other promoters very uncomfortable. There was a lot of resistance from some of the Mindtree promoters, and certain hasty announcements and statements in the media were also made. This interesting interlude between the two companies brought a lot of attention to the acquisition and left the investors in a state of confusion. The main objective of the case will be to analyse and teach the different corporate actions which took place and the strategic decisions that were taken during the entire interaction between the two companies. This case would address teaching objectives for the topics such as hostile takeovers; share buybacks as a new approach to anti-takeover defence; political, legal and industrial analysis relevant to corporate restructuring decisions; and Hubris and Managerialism. A separate teaching perspective on Corporate Business Communication has also been explored.

The Role of Target Termination Fees in REIT Mergers

Target termination fee provisions are widely used in merger agreements and require the target firm to pay the bidder a fixed cash fee in the event the target firm backs out of the agreement. We examine the determinants and consequences of target termination fee provisions in REIT mergers and test the competing agency and efficient contracting hypothesis. We find that target termination fee provisions are more likely in hard to value targets, that is, in deals involving large targets, targets with high leverage, and firms that were not targets of a takeover attempt in the recent past. Our results also suggest that target termination fee provisions are associated with higher offer premiums, announcement period returns, and higher deal completion rates. Collectively, our results indicate that termination fee provisions are used as effective contractual devices in REIT mergers to further target shareholder interests.

The Role of Target Termination Fees in REIT Mergers

Target termination fee provisions are widely used in merger agreements and require the target firm to pay the bidder a fixed cash fee in the event the target firm backs out of the agreement. We examine the determinants and consequences of target termination fee provisions in REIT mergers and test the competing agency and efficient contracting hypothesis. We find that target termination fee provisions are more likely in hard to value targets, that is, in deals involving large targets, targets with high leverage, and firms that were not targets of a takeover attempt in the recent past. Our results also suggest that target termination fee provisions are associated with higher offer premiums, announcement period returns, and higher deal completion rates. Collectively, our results indicate that termination fee provisions are used as effective contractual devices in REIT mergers to further target shareholder interests.

Strategic Decisions in Takeover Auctions

This essay reviews selected theories and empirical evidence describing how bidders and targets navigate four complex decisions involved in any corporate takeover attempt: (1) deal initiation, (2) pre-offer toehold acquisition, (3) offer price and revisions, and (4) the method of payment. We focus in particular on how first-price or English (ascending price) auctions with two competing bidders and a single (pivotal) seller help understand bidder and target incentives in each of these strategic decisions. While largely descriptive of tender offers for control, the auction framework also helps explain choices made in takeover negotiations where the outside option is the outcome of an open auction. Empirical findings include the following key observations: (1) A large fraction of control bids for public targets - about 50% - are initiated by the target and not the bidder. (2) Notwithstanding takeover premiums averaging 40+%, only a small fraction (less than 5%) of bidders acquire a partial ownership position (a toehold) in the target prior to bidding. However, when they do acquire a toehold, it is large (on average 20%). (3) Rival bids are observed in less than 10% of the contests, suggesting that the initial public bid deters further competition. When rival bidder do enter the auction, they do so surprisingly quickly - within two weeks of the initial bid on average - suggesting that bidder valuations are correlated. Bid jumps are large (around 30%), consistent with significant bidding costs. The evidence also supports the hypothesis that the pre-offer runup in the target's stock price includes an element of rational deal anticipation by the market, and that the runup is understood as such by the two parties in merger negotiations. (4) Contrary to theories of bidder opportunistic behavior, the likelihood that a given deal is paid in bidder stock is higher when the target is highly informed about the bidder's operations and so able to value the bidder shares more precisely. This evidence supports the (nested) alternative theory that the bidder's preference to pay in stock rather than in cash is driven by concerns with adverse selection on the target side of the deal. Also, the initial market reaction to the stock payment decision is such that there is no evidence of subsequent abnormal long-run performance for long-short portfolios sorted on cash- versus stock as the payment method.

Anti-Takeover Provisions and Investment Timing

We show how directors can set the strength of a firm's anti-takeover provisions in order to influence the investment-timing decision of a future empire-building CEO. The prospect of future hostile takeover attempts, which terminate the CEO's control benefits if successful, affects the CEO's willingness to invest in low-value projects. If anti-takeover defenses are too strong then the market for corporate control imposes insufficient discipline on the CEO, who invests too soon. If they are too weak then shareholders incur too many costs due to managerial distraction and the CEO invests too late. Anti-takeover defenses need to be stronger if the target firm's shareholders receive a larger proportion of any increase in firm value caused by a change in management.

Bank lending to targets of active takeover attempts: The simultaneous choice of loan maturity, pricing, and security

AbstractI investigate bank loans to takeover targets considering the simultaneous decision of pricing, maturity, collateral, and covenants applying Generalized Method of Moments (GMM). Results are largely in line with the Agency Theory of Covenants (ATC) as pricing for new bank debt is lower given greater collateral and covenant protection, consistent with existing literature on public debt. However, poor performing targets demonstrate a positive relationship between pricing and covenants while bank loans to high performers are consistent with ATC predictions. Finally, loan terms tied to ex post observations of merger outcomes suggest banks possess some knowledge of merger outcomes in advance.

Changes in the Incentive Contracts of Takeover Targets After Merger Failures

This article investigates the changes in and the impacts of the incentive contracts of target firms that survived takeover attempts. Managers of unsuccessful takeover targets that performed poorly prior to takeover attempts received lower compensation and severance payment relative to their counterparts in successful takeover targets, and they benefited less from the completion of the acquisitions. Following the failure of the attempted bids, target firms improved their executives’ compensation packages and exhibited better subsequent firm performance with stronger pay–performance sensitivity. The compensation change was more evident in firms with weaker corporate governance structures before the takeover attempts. The evidence suggests that the external takeover market can have positive impacts by invoking internal control mechanisms, even without a successful merger.

The use of poison pills by US firms over the period 1997-2015: what has been their impact on shareholder value

Poison pills are controversial devices for which no common conclusion as to how the market reacts to their adoption exists. This research collates 4,479 poison pill adoption events by US companies over the period 1997-2015. Statistically significant insights and positive abnormal returns were found on the day the poison pill was adopted. It is for this reason that we argue in favour of the shareholder wealth-maximisation hypothesis, stating that poison pills protect shareholders by providing management a superior bargaining position. The shareholders react positively to poison pill adoption, particularly if a hostile takeover attempt is anticipated. Furthermore, shareholders seem to value the protective effect of the device, which both provides management a superior bargaining position and allows the maximal possible bid premium to be negotiated.