Takeover

The acquisition of one business or company by another, either on an agreed or hostile basis.

The susceptibility of a company to takeover depends on who controls the majority of shares in issue and which shares have the voting rights. Some companies have two classes of shares, one class with voting rights and the other not. In such a case, control of the company can rest with shareholders who don't have a majority of shares but do have a majority of votes.

Private companies can defend themselves relatively easy because their shares tend to be closely held. Public companies are more vulnerable because a predator can go out into the market and quietly build up its holding by buying shares. There are strict rules about the conduct and timing of a takeover bid:

• A shareholder who owns 30% or more of a company' shares has to offer to buy all the other shares at the highest price the shares have achieved in the previous 12 months. This is known as a mandatory bid.
• Otherwise, a predator can announce its intention to bid for a company, and if it does so, the takeover clock immediately starts running. They have 28 days to post their bid or offer document to shareholders. When the bid has been posted (Day 1 on the clock), the target has 14 days to post its defence document. Day 39 is the last day on which a target can publish new information about itself such as trading forecasts, profit or dividend forecasts, or assets values. Day 46 is the last day the bidder can announce new terms. And the bid must close on Day 60, unless a new bidder emerges in which case the clock goes back to the beginning.
• Note that the predator company does not have to follow through with its bid. In its bid document it can make its offer conditional on receiving a certain number of acceptances from shareholders, or on the bid not being referred to the Office of Fair Trading. But the bid must go unconditional by Day 60 (or it lapses altogether), and once a bidder has 50% acceptances it can declare the bid unconditional, giving shareholders who haven't yet responded 14 days to make up their minds.
• Once a bidder has over 90% of the shares in a company, it can compulsorily buy out the remaining 10% of shareholders in order to acquire full control, and those shareholders have no choice but to accept the offer.