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Hostile Takeovers, Strategies, and Defenses

Mergers and Acquisitions

1) What is your opinion to the question below?

There are three main types of acquisitions: an acquisition of assets, an acquisition of stock, and a consolidation or merger. With an acquisition of assets, a company acquires another company by purchasing all of the company's assets. With an acquisition of stock, the company's voting stock is bought in exchange for shares of stock, cash, etc. A merger occurs when one company is absorbed by another company. A consolidation is similar to a merger except that in a consolidation a completely new company emerges. An acquisition is characterized as a vertical acquisition, a horizontal acquisition, or a conglomerate acquisition. A vertical acquisition occurs when a company acquires a company that's from a different part of the production process. A horizontal acquisition occurs when a company acquires a competitor. A conglomerate acquisition occurs when a company acquires a company in a totally different industry. A Net Present Value (NPV) calculation is typically employed by a company to determine if an acquisition should move forward.


Bruner, R.F. (2004, May 31). Applied mergers and acquisitions. Retrieved from

Martynova, M., and Renneboog, L. (2006, February 1). Mergers and acquisitions in europe. Retrieved from


Below are some questions for discussion.

1. What are three reasons, in general, why firms are acquired? Please provide details regarding each of these reasons.

2. State and describe a hostile takeover that occurred between 2000 and 2008. Is that hostile takeover concerned a success or failure today? Please explain.

3. Name and describe three strategies that companies can employ to deter a takeover.

Solution Preview

1. What are three reasons, in general, why firms are acquired? Please provide details regarding each of these reasons.

There are several reasons as to why a firm would want to acquire another firm. One of the main reasons is for growth. This is a common occurrence that we hear about in the news. Company A is a major leader in their respective industry. In order to become even bigger and to try and monopolize the industry, Company A acquires Company B, who is the second leader in the industry. Some acquisitions of this type are successful and others are not. The government must approve acquisitions of companies over a certain size. This prevents from a monopoly taking place after Company A acquires Company B. If Company A acquires B and is able to create a monopoly, it strains the market because Company C would be at an immediate, significant disadvantage. In order to keep the markets and economy running as they should, the government intervenes on these types of attempted acquisitions.

A second reason deals with increased output and decreased cost reduction. If Company A makes a product similar to Company B and Company A has been having trouble increasing revenue and/or controlling costs, Company A acquires ...

Solution Summary

This solution discusses hostile takeovers and common strategies that can be used when a hostile takeover is likely. This solution also identifies and discusses a successful hostile takeover between the 2000 to 2008 time period.