The Hostile Mindtree Takeover

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By admin March 22, 2019 13:47

The Hostile Mindtree Takeover

A hostile takeover occurs when an entity attempts to take control of a firm without the consent of the target company’s board of directors. In place of the target company’s board approval, the acquirer can issue a tender offer, employ a proxy fight or to buys the necessary company stock in the open market. A hostile takeover by Larsen & Toubro, of Mindtree, is the one of the firsts tohappen in India.

What are Mindtree and L&T ?

Mindtree is a mid-tier IT services company. L&T is a major technology, engineering,construction, manufacturing and financial services conglomerate, with global operations. Mindtree Ltd’s founders and management had rejected Larsen and Toubro Ltd (L&T), for a friendly merger and acquisition deal. The L&T has decided to use its cash for purchasing shares of Mindtree in open market.

What is Hostile Takeover? A hostile takeover is the acquisition of one company (called the target company) by another (called the acquirer) that is accomplished by

1. going directly to the company&’s shareholders

2. fighting to replace management to get the acquisition approved. A hostile takeover can be accomplished through either a tender offer or a proxy fight.

  • The key characteristic of a hostile takeover is that the target company’s management does not want the deal to go through.
  • Sometimes a company’s management will defend against unwanted hostile takeovers by using several controversial strategies.

Factors responsible for hostile takeover

1. A company may be significantly undervalued or

2. wanting access to a company’s brand, operations, technology or industry foothold or

3. strategic moves by activist investors looking to effect change on a company’s operations.

 

When a company, an investor or a group of investors makes a tender offer to purchase the shares of another company at a premium above the current market value, the board of directors might reject the offer. The acquiring company can take that offer directly to the shareholders, who may choose to accept it if it is at a sufficient premium to market value or if they are unhappy with current management. The sale of the stock only takes place if a sufficient number of stockholders, usually a majority, agree to accept the offer. This method has been used by the L&T to take over the Mindtree.

What are the options before Mindtree?

1. The resignation of key personnel of Mindtree in the case of a hostile takeover,

2. Mindtree has to aggressively buy stock in the company attempting the takeover.

admin
By admin March 22, 2019 13:47