What is a Friendly Takeover?

A friendly takeover happens when one company is willingly acquired by another. In a friendly takeover, the management and board of directors consent to or approve the takeover. It’s important to note that the target company’s shareholders will still need to agree to the takeover.

Usually, the acquiring firm will make a public offer, normally of stock and/or cash. The target firm’s board will then publicly approve the buyout terms. The shareholders and regulators still need to greenlight the buyout so that it can move forward.

Most takeovers are friendly and cooperative, with management and the board of directors approving them. Hostile takeovers are rare but can receive a lot of media attention.

Friendly takeovers can be executed either as a merger or an acquisition

What’s the difference between a friendly and a hostile takeover?

A friendly takeover is one where the company’s management and board of directors approve of the takeover instead of opposing it. It might even be something they’ve deliberately sought out, perhaps as an exit strategy.

A hostile takeover is one where the company’s management does not want the takeover to take place. The acquiring company can push through a hostile takeover by going directly to the target company’s shareholders.

Can a friendly takeover turn hostile?

Yes. An initially friendly takeover bid could turn into a hostile takeover if the board or shareholders reject the buyout terms.

It’s possible, though rare, for an initially hostile takeover to become friendly, as the target and acquiring company seek to find common ground and agree on the buyout terms.

What are the advantages of a friendly takeover?

A friendly takeover is far better than a hostile takeover for all involved. It tends to mean:

  • The deal is better for both the acquiring and target companies.
  • The target company doesn’t need to spend money (or lose value) to fight an unwanted takeover attempt.
  • The acquiring company doesn’t need to pay an excessive amount to force through the takeover.
  • Shareholders will often get a better price per share in a friendly takeover.

A friendly takeover is a merger or acquisition agreed to by both parties. It’s in contrast to a hostile takeover, in which one company acquires another when the shareholders do not agree to the acquisition.