What is a hostile takeover?

A hostile takeover is a type of corporate takeover, or acquisition, in which an acquiring company (the “battling bidder”) intends to take control of another company without the consent of the target’s board of directors. In Delaware, hostile takeovers are generally prohibited unless the target company’s board of directors agrees to the takeover. In Delaware, a hostile takeover is a particularly tricky process since it requires the approval of the target company’s board of directors. A hostile takeover typically begins with the hostile bidder announcing an offer for the target company’s stock. This offer usually includes a significant premium (the increased price per share) over the current market value of the stock. Shareholders of the target company can then decide whether or not to accept the premium and tender their shares. If a majority of shareholders accept the hostile bidder’s offer, the bidder will then acquire control of the company. If the target company’s board of directors objects to the offer, they may pursue defensive tactics such as issuing additional shares, creating a new class of shares, or acquiring a “white knight” to help prevent the takeover. Delaware corporate law permits hostile takeovers to occur, but only if the target company’s board of directors consents. As such, hostile takeovers remain a rare event in Delaware.

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