Hostile Deals: Caveat Emptor

Posted on 9 October 2009. Filed under: Tips & Suggestions |

In a related blog, I’ve commented on hostile deals.  Why?  There’s been a lot of press on this topic because of last month’s $19 billion unsolicited (hostile) offer for Cadbury by Kraft.  Certainly, as I note in that blog, the deal has had so much attention not just because it’s hostile, but it’s also all about chocolate!

The facts about hostile and unsolicited deal:  first, there aren’t many of them (in fact, only about 1% of all announced deals are either hostile or unsolicited).  Secondly, only 40% of those ever do get completed.  As there’s fewer than 100 hostile or unsolicited bids in an average year recently, that means only 40 complete (although admittedly a very small number of those targets that do escape nevertheless end up being purchased by somoene else eventually).  Not huge numbers.  But you certainly don’t want to be in one of those companies if the deal does complete, or even in one of the 100 that receives a bid.

When a hostile deal is successful, it’s bad news for the employees and management of the company that’s been taken over.  A greater percentage of employees in a hostile target are made redundant than when a deal is friendly.  There’s less chance to negotiate before the deal completes to maintain your position in the company — or even to negotiate ANY position.  And very often the hostile bidder wants the company only for its assets, which is why they were willing to initiate a hostile deal in the first place because they didn’t care whether they antagonised the employees or not.

Another reason to focus immediately on your survival when you hear that your company may be the target of a hostile bidder!

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