Whether a purchase is perceived as “friendly” or “hostile” depends in large part on how the proposed acquisition will be communicated and perceived to the board of directors, employees and shareholders of the target company. It is normal for the communications of the M-A to take place in what is called a “privacy bubble”, which restricts the flow of information in accordance with confidentiality agreements.  In the case of a quality transaction, companies work with negotiations; in the case of a hostile deal, the board of directors and/or target management are not willing to be purchased, or the target`s board of directors has no prior knowledge of the offer. Hostile acquisitions can and often become “friendly” as the purchaser ensures the transaction is confirmed by the board of directors of the acquired company. This usually requires an improvement in supply conditions and/or through negotiation. Concentric mergers diversify the combined company`s offering and allow the company to benefit from areas with common know-how. These mergers can also stimulate new business, as the company becomes more of a “one-stop shop” that offers more services than customers of both companies typically seek. The largest mergers in history have each reached more than $100 billion. In 2000, Vodafone acquired Mannesmann for $181 billion to create the world`s largest mobile phone company. In 2000, AOL and Time Warner merged into a $164 million deal, considered one of the greatest flops of all time. In 2014, Verizon Communications bought Vodafone`s 45% stake in Vodafone Wireless for $130 billion. Another reason for acquisitions is financial restructuring – cost reduction, share sales, employee layoffs and refinancing of the company to increase shareholder value.
Financially motivated mergers are not based on the potential for economies of scale, but on the purchaser`s belief that the objective has a hidden value that can be released through restructuring. Most financially motivated mergers involve large companies. In January 2018, Brookfield Business Partners, a subsidiary of Canada`s Brookfield Asset Management, announced plans to buy Westinghouse Electric Co LLC, Toshiba Corp.`s insolvent nuclear services company, for $4.6 billion. Brookfield has a history of turning around troubled companies. A merger, for example, between Coca-Cola and the Pepsi beverage industry would be horizontal. The goal of a horizontal merger is to create a new, larger organization with more market share. Since the activity of companies resulting from concentration can be very similar, it may be possible to join certain activities, such as manufacturing. B.dem, and reduce costs. A famous example of horizontal fusion was that between HP (Hewlett-Packard) and Compaq in 2011. The successful merger of these two companies has spawned a global technology leader worth more than $87 billion.
As with many aspects of the law, a director`s responsibilities and duties for a merger or takeover depend on the facts and circumstances. From a high level, when a transaction is not essential to the business or is only slightly significant, the degree of participation and control of the board of directors is reduced and the fundamental rule of business judgment applies. In cases where a company`s growth strategy is based on acquisitions, the Board of Directors may, for example, define the strategy and parameters of potential acquisitions, but leave the conclusion of the acquisitions largely to C-Suite`s executives and executives. Size is definitely an advantage if you are competing in the global market, but larger does not always mean better in the merger sector. The results of the study show that intoxicating mega-mergers can indeed be a bankruptcy for the investors who hold these shares. Companies are therefore smart to consider their options before putting their dollars into the largest merger distributors