Briefly describe two ways to launch a hostile takeover. What will be

QUESTION

Briefly describe two ways to launch a hostile takeover.

What will be an ideal response?

ANSWER

Answer: A hostile takeover can be launched by a tender offer or by a proxy fight. A tender offer occurs when an outsider seeking to take over a company directly contacts the company’s shareholders and offers to buy their stock at a price above the current market price in an attempt to buy enough stock to gain control of the company. In a proxy fight, the outsider contacts shareholders and urges them to vote for the corporate raider’s handpicked candidates for the board of directors. If the raider’s directors are voted in and are in the majority, they can replace the existing management of the company with their preferred managers.
Explanation: Either a tender offer or a proxy fight can launch a hostile takeover. With a tender offer, an outsider seeking to take over a company directly contacts the company’s shareholders and offers to buy their stock at a price that exceeds the present market price. The raider hopes to get enough shareholders to sell that he or she can gain control of the company. Proxy is the authority to act for another. In a proxy fight, the outsider contacts shareholders and urges them to vote for the raider’s handpicked candidates for the board of directors. If the raider’s directors are voted in (and they are in the majority), they can then force out the company’s existing top management.