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Successful and Failing Takeover Defense Essay

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Updated: May 17th, 2022

A good example of a takeover that did not go as planned is the Daimler Benz and Chrysler merger. Daimler Benz sought to get in control of Chrysler by buying the company off the stock exchange. The company thus staged one of the most memorable successful takeovers after acquiring a 76% stake in Chrysler worth over $867 million. When companies eye other companies in an effort to merge or to acquire them for other reasons, not all parties may agree to the idea (Goodman 104). As such, some management may seek to follow the path of hostile takeover. This mainly done through the buying of the majority shares in a publicly traded company then forcing out the remaining shareholders to have total control of the company (Pride et.al., 45) as in the case of Daimler Benz and Chrysler. For this reason, Chrysler staged a takeover defense detail consisting of publicly giving all the wrong decisions that Daimler Benz had undertaken to woo the public into retaining their shares to avoid Daimler Benz from purchasing them (Maeijer 24).

One of the most famous proxy take over was witnessed between Hewlett-Packard’s take-over of Compaq. These are two of the world’s largest companies dealing in the manufacture of computers with the highest percentage of market shares (Koslowski 23). The management at HP set its sights at acquiring the controlling stake in Compaq despite of opposition from the management at Compaq. The deal was worth $259 million. The founders of Compaq were against the merger and presented a takeover defense detail of lowering the value of the company shares to deter any interested company. The move sent the share prices of the company tumbling down but Hewlett-Packard never quavered in their quest to gain the company. HP eventually managed to win the support of slightly over 51% of the shareholders votes. The case went to court but the court dismissed it in favor of HP since they managed the needed quorum though in a rather unethical manner (Hashemian 17).

Oracle is also a leading computer based solutions company with a huge market share. When the company set its eyes on acquiring PeopleSoft in 2004, the deal slowly turned into a public fistfight with contrasting opinions from the managements of the two companies. PeopleSoft had started off as a small private company yet it had grown to become a business leader in the development and support of Information technology solutions. It was seen as a threat by Oracle thus the push to buy it off the market. It appears that Oracle was leaving nothing to chance in a frantic effort to gain PeopleSoft. PeopleSoft management tried to offer the best takeover defense detail they could by releasing their new products well earlier than planned. This sent the market into frenzy with the products selling out within days and consequently sending the cost of the company shares to the roof. This was the defense detail to make the price-worth of the company higher than the tender offer value offered by Oracle. PeopleSoft was then a smaller company with a huge following, which attracted Oracle. Oracle was seeking to acquire 100% of the company by buying off the company completely. The tender offer value was in the tune of $1.2 billion for which Oracle was willing to pay (Ferrarini et al. 23) The management at PeopleSoft could not agree with Dell on the proper compensation package after the effects of the takeover defense details that sent the company worth higher by almost 23%. The increase in the price in the company was the last defense that the company could uphold to avoid the sale going through. PeopleSoft was looking forward to the seemingly inevitable looming collapse of the deal. However, Oracle went ahead to deposit the moneys discussed into the accounts of PeopleSoft despite of the offer rejection. It turned into a court drama with the two companies contesting ownership and the receipt of the money to buy off PeopleSoft. Eventually the matter settled in favor of PeopleSoft (Ferrarini et al. 17-21).

Another case of an acquisition gone wrong is the case of Ryanair making a hostile bid towards Aer Lingus. Ryan air already holds 16% shares in Aer Lingus but went ahead to seek a larger and controlling shareholding leading to an eventual acquisition. The deal was to be worth over $ 1.2 billion (Keasey et.al. 1-52). The management at Aer Lingus was against the deal since Ryanair wanted to acquire it to take control of the market and not for a better business decision. Hard work had gone into creating and maintaining Aer Lingus to the place it was and there was no way they would give in to Ryanair. The management staged takeover defense details involving workers unions and workers to be against the takeover by insisting that they would all lose their jobs if the merger went through. Aer Lingus was also seemingly attractive to predators like Ryanair because Ryanair was known for its bad treatment of its staffs. The case went to court and the staff welfare unions managed to show course why hundreds of employees would lose their jobs if the merger went through. The court ruled in their favor and the merger never saw the light of day. Acquisitions and mergers continue to occur across all sectors in business and are inevitable.

Works Cited

Ferrarini, Guido et al. Reforming company and takeover law in Europe. Oxford New York: Oxford University Press, 2004. Print.

Goodman, Carl. The rule of law in Japan : a comparative analysis. Alphen aan den Rijn, The Netherlands Frederick, Md: Wolters Kluwer Law & Business Sold and distributed in North, Central and South America by Aspen Pub, 2008. Print.

Hashemian, Robert. Financial Markets for the Rest of Us. San Jose: Writers Club Press, 2001. Print.

Keasey, Kevin et.al. Corporate Governance: Accountability, Enterprise and International Comparisons. Chichester: John Wiley & Sons, LTD, 2005. Print.

Koslowski, Peter. The ethics of banking : conclusions from the financial crisis. Dordrecht New York: Springer, 2011. Print.

Maeijer, Josephus et.al. Defensive Measures against Hostile Takeovers in the Common Market. The Hague: M. Nijhoff, 1990. Print.

Pride, William et.al. Business. New York: South-Western College/West, 2011. Print.

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