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A hostile takeover is when an acquiring company tries to take over another business without the consent or cooperation of the target business' management or board of directors. In a hostile takeover, the acquiring business frequently makes a direct offer to buy the stockholders' shares of the target company without the management's consent.
When the target company is undervalued or has important assets that could be better utilized under the purchasing company's management, hostile takeovers frequently take place. A hostile takeover can be carried out through a number of strategies, such as a tender offer, a proxy battle, or a leveraged buyout.
That the acquiring business may overpay for the target company, resulting in a reduction in shareholder value, is one of the main dangers connected with hostile takeovers. Hostile takeovers can also disrupt the target company's operations, which may result in job losses and other unfavorable effects.
To safeguard shareholder interests and reduce possible harm from hostile takeovers, regulators in many nations have put rules and regulations in place. Several of these rules have "poison pill" clauses that make it more challenging for an acquiring business to take control of a target company by offering additional stock or other instruments to current shareholders.
