Typically when a business has a board of directors, the board will be able to approve or deny another party’s attempts to purchase shares of the company. A hostile takeover happens when that third-party aims to buy a majority of shares of a company without that consent from the board. Finding a way to work around the board may result in the third party being successful with their mission of gaining a controlling amount of shares.
If you need help with a hostile takeover of your company in California you can take your case to the Los Angeles business litigation attorneys at Leiva Law Firm for assistance and legal support.
How Can a Third-Party Perform a Hostile Takeover of a Company?
The following four strategies are most often used:
Tender Offer
A tender offer happens when the third party connects with the shareholders and offers a price to purchase those shares. If enough shareholders are willing to sell, the third party can acquire enough of the company to start making decisions, including replacing the current board. Typically, the newly elected board members will represent and support the third-party’s interests essentially positioning that entity that purchased the shares, or the acquirer, to have control of the company.
Creeping Tender Offer
When an entity slowly starts accumulating up publicly traded shares of a company until they have a controlling amount, this is known as a creeping tender offer. Again, the entity will be able to appoint its own directors to replace those that currently exist on the board.
Proxy Contest
An entity may work with shareholders to come together and replace the existing board members with alternatives that the entity chooses. An entity may put their proposed director in the proxy material, which can motivate the shareholders to vote for the nominee. Should that happen, the new director will be placed on the board and serve the interests of the entity that worked to get them there.
Bear Hug
Board members may feel obligated to accept an offer made for shares that is exceedingly high. This is because the board may be mandated to accept such offers as that influx of money is good for their shareholders. The board members may be bound to make decisions that benefit shareholders even if they do not personally agree with the transaction.
There are ways to safeguard against a hostile takeover or respond to one. The Los Angeles business attorneys at Leiva Law will be able to advise you of your best options to address the distressing and frustrating situation.
Speak with a Los Angeles Business Attorney Today
The seasoned Los Angeles corporate formation attorneys at Leiva Law are here for you when you are facing legal challenges that threaten the effective functioning of your company. You can schedule a free, no-obligation consultation with an attorney at Leiva Law to discuss your situation and learn more about what legal remedies may exist for your circumstances. Call Leiva Law today at (818) 519-4465 to get in touch with a qualified lawyer.
