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Malcolm Zoppi Sun Oct 29 2023

Corporate Takeover Explained: What is a Company Takeover?

A company takeover occurs when one company acquires another company. The acquiring company gains control of the target company’s operations, assets, and liabilities. Takeovers can take various forms, such as mergers or acquisitions, and can be either hostile or friendly.

A company takeover occurs when one company acquires another company. The acquiring company gains control of the target company’s operations, assets, and liabilities. Takeovers can take various forms, such as mergers or acquisitions, and can be either hostile or friendly.

In mergers, two companies combine to form a new entity. In acquisitions, one company buys another company’s assets or stocks. Hostile takeovers happen when an acquiring company takes over a target company against the board of directors’ wishes. Conversely, friendly takeovers occur when both parties agree to the acquisition.

The target company and its shareholders play a crucial role in a company takeover. The target company’s board of directors must approve the acquisition, and shareholders must vote on the offer price. The acquiring company must analyse the target company’s financial statement to determine its value and offer price per share.

Key Takeaways

• A company takeover occurs when one company acquires another company.
• Takeovers can take various forms, such as mergers or acquisitions, and can be either hostile or friendly.
• The target company’s board of directors must approve the acquisition, and shareholders must vote on the offer price.
• The acquiring company must analyse the target company’s financial statement to determine its value and offer price per share.
• Takeovers can have significant implications and effects, such as gaining market share and taking control of operations.

Types of Company Takeovers: Explained

Company takeovers come in different forms depending on how they are executed. The following are the most common types:

Hostile takeover

In a hostile takeover, the acquiring company attempts to gain control of the target company without the consent of its board of directors. This often involves buying a large number of the target company’s shares on the open market to gain a controlling interest. Hostile takeovers can be contentious and lead to legal battles between the companies involved.

Friendly takeover

A friendly takeover is one in which the acquiring company and the target company agree to the acquisition. The terms of the deal are negotiated and agreed upon by both parties. The target company’s board of directors often play a crucial role in facilitating the deal. This type of takeover is usually less contentious than a hostile takeover.

Reverse takeover

In a reverse takeover, a smaller company takes over a larger company. This is typically done to gain access to the larger company’s resources, such as market share, brand recognition, or intellectual property. The smaller company often uses its stock as currency to finance the acquisition.

Backflip takeover

A backflip takeover occurs when a company that was previously acquired becomes the new acquirer. This can happen when a company is taken private and then later goes public again, or when a company is acquired by another company and then later acquires that same company.

Strategic takeover

A strategic takeover is driven by specific business goals, such as expanding into new markets, diversifying the company’s product offerings, or acquiring technology or intellectual property. The acquiring company often has a clear strategic plan in place for how it will integrate the target company into its existing operations.

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Understanding the different types of takeovers can be helpful in assessing their potential impact on the target company and the wider market.

The Process of a Company Takeover: Step by Step

The process of acquiring a company involves several steps and key players. It typically begins with a takeover bid, where the acquiring company expresses interest in taking over the target company. Once the target company agrees to the acquisition, a tender offer is made to the shareholders, who can either accept or reject the offer.

The board of directors of the target company plays a crucial role in the process. They analyse the financial statements of the target company, including its assets, liabilities, revenues, and profits, to determine the fair share price. The board also evaluates the offer price of the acquiring company and decides whether to accept or reject it.

If the board of directors approves the offer, the acquiring company can take control of the target company’s operations. This involves appointing new management and making changes in the corporate finance structure. The acquiring company may also buy out existing shareholders to gain a controlling stake in the target company.

The share price and offer price are critical factors in the process of a company takeover. The share price represents the price per share of the target company, while the offer price is the price per share offered by the acquiring company. If the offer price is higher than the share price, the shareholders are more likely to accept the offer, and the takeover is more likely to be successful.

The process of a company takeover can be complex and involves numerous legal and regulatory requirements. Therefore, it is essential to have a team of experts, including legal advisors and financial analysts, to guide the acquiring company through the process.

Implications and Effects of a Company Takeover

Company takeovers can have significant implications and effects on the businesses involved and the wider market. The acquiring company can gain market share and take control of operations, leading to changes in corporate finance and buyouts of existing shareholders. Takeovers can also provide opportunities to enter new markets or convert the target company from a private to a public company or vice versa.

One of the main implications of a company takeover is the potential consolidation of the market. By acquiring a competitor, the acquiring company can increase its market share, leading to increased pricing power and potentially lower competition. This can have a significant impact on the wider market and can result in a restructuring of the industry.

Another effect of a company takeover is the control of operations that the acquiring company gains. This can include changes to management, strategy, and structure. In some cases, the acquiring company may also choose to incorporate the acquired company into their existing business, resulting in a complete integration of operations.

Corporate finance can also be impacted by a company takeover. The acquiring company may choose to finance the acquisition through additional debt or equity, leading to changes in the capital structure of the business . Additionally, buyouts of existing shareholders can result in changes to the ownership structure of the business.

Takeovers can also present opportunities for companies to enter new markets or expand their existing offerings. By acquiring a target company, the acquiring company gains access to the target’s customer base and product portfolio. Alternatively, a company takeover can result in a conversion of the target company from a private to a public company or vice versa.

Overall, a company takeover can have significant implications and effects on the businesses involved and the wider market. It is important for both the acquiring and acquired companies to carefully consider the strategic implications of a takeover and make well-informed decisions to ensure the success of the acquisition.

Strategies and Defense Mechanisms in Company Takeovers

During a company takeover, the target company may employ a variety of strategies and defense mechanisms to protect itself against the acquiring company. These tactics can include:

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• Takeover Defense Strategy: The target company may implement a defense strategy to resist the takeover, such as seeking a white knight or a friendly acquirer to counter the hostile takeover bid.
• Poison Pill: A poison pill is a defense mechanism that can be implemented by the target company to make the acquisition less attractive. The poison pill can be in the form of dilutive securities, which means that more shares are issued to existing shareholders, which decreases the acquirer’s percentage of ownership, or in the form of a golden parachute, which provides target company executives with significant compensation in the event of a takeover.
• Corporate Raider: A corporate raider is an individual or a group that seeks to take over a company for a profit. Corporate raiders are known for using various tactics to gain control of a company, such as purchasing a large stake in the company and using it to influence management or launching a proxy fight to gain control of the board of directors.
• Opportunist Takeover: An opportunist takeover occurs when a company takes advantage of a target company’s weak financial position, market opportunity, or other factors to make an acquisition at a lower price. The target company may not have implemented any defense mechanism, and the acquirer may use this to their advantage.

It is important for the target company to consider these strategies and defense mechanisms when preparing for a potential takeover. The company may need to seek advice from legal and financial experts to determine the best course of action in defending against a hostile takeover bid.

Takeovers in the UK: Laws and Regulations

When it comes to company takeovers in the United Kingdom, there are various laws and regulations that companies need to follow. The foremost amongst them is the takeover code that is administered by the UK’s Panel on Takeovers and Mergers. This code establishes a framework for mergers and acquisitions and sets out rules for fair dealing and transparency.

One of the critical aspects of the takeover code is ensuring that there is equality between the acquiring and target companies. The code stipulates that all shareholders must be treated on an equal footing and that the acquiring company must make the same offer to all shareholders.

In addition to the takeover code, there are several other legal requirements that companies must comply with. These include the laws governing mergers and acquisitions, which can be complex and vary depending on the size and nature of the transaction. For instance, companies may need to seek regulatory approval for certain acquisitions, such as those involving a public utility or a financial institution.

When acquiring a target business, companies must also ensure that they are acquiring all assets and liabilities of the target company. This includes conducting due diligence to assess the target company’s financial position, intellectual property rights, and any potential legal liabilities.

Furthermore, companies must comply with the rules and regulations surrounding company purchasing. These laws govern the way that companies can be bought and sold and provide guidelines for the terms and conditions of the transaction.

Overall, the laws and regulations governing company takeovers in the UK aim to ensure fairness, transparency, and accountability in the process. Companies should seek legal advice to ensure that they comply with all the relevant laws and regulations and can successfully navigate the complexities of the takeover process.

In conclusion, corporate takeovers involve one company acquiring another company through a merger or acquisition process. The success of a takeover depends on strategic decision-making from both the acquiring company and the acquired company’s management and board of directors.

The acquiring company gains control of operations and can make changes in corporate finance, buy out existing shareholders, and enter new markets. On the other hand, the acquired company can convert from private to public or vice versa.

During a takeover, strategies and defense mechanisms such as poison pills and takeover defense strategies are employed to protect the target company from corporate raiders or opportunistic takeovers.

In the UK, takeovers are governed by laws and regulations, including the takeover code and legal frameworks for mergers and acquisitions. The companies involved in acquiring a target business must comply with these regulations.

Overall, corporate takeovers are a complex process that requires careful planning and execution from all parties involved. The acquiring company and the acquired company’s management and board of directors must work together to ensure a successful outcome.

What is a company takeover?

A company takeover refers to the acquisition or merger of one company by another, resulting in the acquiring company gaining control over the target company.

What are the types of company takeovers?

There are different types of company takeovers, including hostile takeovers, friendly takeovers, reverse takeovers, backflip takeovers, and strategic takeovers. Each type varies in terms of the approach and agreement between the companies involved.

What is the process of a company takeover?

The process of a company takeover typically involves initiating a takeover bid, making a tender offer to shareholders, involving the board of directors, analysing financial statements, and determining the share price and offer price.

What are the implications and effects of a company takeover?

A company takeover can have various implications and effects, such as gaining market share, taking control of operations, making changes in corporate finance, buying out existing shareholders, entering new markets, and converting the target company from private to public or vice versa.

What are the strategies and defense mechanisms in company takeovers?

Strategies and defense mechanisms in company takeovers include takeover defense strategies implemented by the target company to protect itself from corporate raiders or opportunistic takeovers. These can include poison pills and other anti-takeover measures.

What are the laws and regulations governing company takeovers in the UK?

In the UK, company takeovers are governed by the takeover code and the legal framework for mergers and acquisitions. These regulations outline the responsibilities and processes for companies involved in acquiring a target business.

What are the key points to consider in company takeovers?

Key points to consider in company takeovers include the importance of the management and board of directors, differentiating between the acquiring and acquired companies, and the significance of strategic decision-making in successful takeovers.

Find out more!

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• Breach of Settlement Agreement: Consequences and Remedies Explained
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• What is a Counter Offer in Contract Law? Explained Simply and Clearly
• Understanding the Costs: How Much Do Injunctions Cost in the UK?

Disclaimer: This document has been prepared for informational purposes only and should not be construed as legal or financial advice. You should always seek independent professional advice and not rely on the content of this document as every individual circumstance is unique. Additionally, this document is not intended to prejudge the legal, financial or tax position of any person.

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Home » Management Case Studies » Case Study: Kraft’s Takeover of Cadbury

Case Study: Kraft’s Takeover of Cadbury

Cadbury’s origins date back to almost two centuries when it was founded by John Cadbury who started the business by selling cocoa and tea in Birmingham, UK. Later he expanded by starting a line of beverages after a merger with Indian Schweppes changing the company name to Cadbury Schweppes. Successful product developments and launches have enabled Cadbury to boast of an extensive confectionery line consisting of Cocoa Essence, Easter Eggs, Milk Chocolate, Cadbury Fingers, Dairy Milk, Bourneville Chocolate, Milk Tray, Flake Creme Egg, Crunchie, Picnic, Curly windy, Wispa boost, Twirl and Time Out.

Kraft, on the other hand, is a US company about a century old, which started off as a door to door cheese business but expanded into other confectionery items through many takeovers previously such as Ritz Crackers, Nabisco (Oreos) and Phenix Cheese Corporation (Philadelphia Cheese) to achieve success. It is second in terms of sales and popularity in the confectionery industry with annual revenues of $42 billion, operating in more than 150 countries.

Cadbury and Kraft are both multinational operations with activities in both developed and developing countries. Cadbury is however the market leader in UK and Ireland’s confectionery where consumers have a liking for British chocolate containing vegetable oil having a richer taste in milk and also sweeter as opposed to continental chocolate having cocoa fat content; hence Kraft has a low share in such markets. Also, Cadbury’s strong standing in the Indian (Schweppes) and North American Markets was cleverly identified by Kraft who wanted to tap it and exploit under its own name now to add to its success story.

Inside Story of Cadbury and Kraft before Takeover

Cadbury has faced many ups and downs throughout its journey especially under the visionary leadership of Todd Stitzer. Todd Stitzer working successfully for 20 years for Cadbury Schweppes has played a key role as a master mind behind the acquisitions of soft drinks industries made by Cadbury in US. He was later appointed as the chief strategy officer by John Sunderland to the confectionery side to achieve the similar success. The then competitors in the chocolates and sweets industry were the international companies Nestle, Mars, Kraft, Wrigley, Ferrero and Hershey. Stitzer said that acquisitions alone would not solve the problems of Cadbury. He said that the revenue growth model has to be revitalized to gain in the financial performance . Stitzer had developed many strategies, took some visionary steps and led Cadbury gain the business world with his strategic thinking . Stitzer and his management team aimed at the global domination in the Confectionery world, while the stakeholders were much worried about the financial performance. Overall with all his visionary leadership abilities and strategic decision making capabilities , Cadbury Schweppes split into pure confectionery leader Cadbury. Nelson Peltz, founder of the hedge fund Trian Fund Management also had his own role in the business of Cadbury.

Irene Rosenfield, CEO, Kraft Food Industries Inc. had a keen interest in the confectionery business and proposed an offer to buy Cadbury to Carr, Chairman of Cadbury after Sunderland. Carr without consulting the stakeholders had refused the offer but Peltz who still owned the shares in the Cadbury with discussion and negotiation with Kraft finally made Cadbury lose its independence in January 2010.

The Idea of a Takeover

Due to recessionary times following fall in sales, many companies in the confectionery industry recognized the potential of merging with their competitors to become competitive and enjoy economies of scale . Cadbury had continued to be a strong performer in the confectionery industry and shown steady performance and growth in light of the turbulent economic times. Much of Cadbury’s growth was due to its presence in emerging global markets . Kraft was attracted to Cadbury due its strong performance during the economic crisis . This led to Kraft’s proposal to Cadbury of a takeover.

The initial offering of $16.3 billion or 740 pence per share by Kraft to Cadbury was outright rejected as derisory and an attempt by Kraft to take over Cadbury for cheap. Cadbury has had strong brands whose icons are etched in the minds all over the world, an impressive category line and extensive worldwide consumer base. Successful financial overview and steady business model reinforced Cadbury’s belief that it should be an independent company. Kraft’s bid did not come remotely close to reflecting the company’s true worth .

Kraft proposed another bid shortly. This comprised of an offer of £10.1 billion ($17 billion, same terms as the first bid in September-300 pence in cash and 0.2589 Kraft shares per Cadbury shares. The closing price of 9th November reflected the bid valuation of Cadbury at 710 pence which was lower than the share price of 761p on that day.

Kraft’s share price: $26.53; Exchange rate (as agreed): $1.66 / GBP. Ratio: 0.2589 Kraft shares per every Cadbury share (26.53/1.66 * 0.2589 = £ 4.133 + 4.13 = £ 7.13). This was less than the price of Cadbury on that day and even the initial level of £ 7.45.

Cadbury rejected the offer on the basis of undervalued Cadbury which was now of a lesser value. It was in fact even lower than the current Cadbury share price. The Cadbury chairman said: “Under your proposal, Cadbury would be absorbed into Kraft’s low growth, conglomerate business model , an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company.”

The hype created by rumors of takeover figures led to exciting speculations. Media reported Ferrero to be considering a rival bid. Hershey’s confirmed its own interest for same purpose. There were not only speculations of a joint bid but also of Kohlberg Kravis Roberts & Co. joining the bidding race. All this favored Cadbury whose share price witnessed new highs. Hershey’s and Ferrero would struggle to bid alone and only their combined offer could beat Kraft’s offer.

On January 18, Kraft finally managed to take over one of the world’s second largest confectionery manufacturer in a hostile bid of an enormous 11.5billion (US$19.5billion). This deal will be remembered in history as one of the largest transnational deals, especially in the aftermath of credit crunch. After four months of continuous resistance, Cadbury shareholders agreed to Kraft’s offering of $19.5 billion, (840 pence per share). This was agreed upon with the spirit of creating the world’s largest confectioner. This consisted of 500 pence in cash per share and the remaining amount paid to Cadbury shareholder in the form of Kraft shares. The shareholders had the power to decide the mix of amount they wanted in cash and shares.   According to estimations, the finals offer presented a multiple of 13 times Cadbury’s earnings in 2009 (after interest, taxes and debt were paid).

The high bid price overruled the threat of Hershey’s or Unilever offering a price for the same strategy, that is take over. The only rival left   was Nestle which too was reduced significantly when Cadbury’s Director signed the agreement that if Cadbury were to change its mind about the takeover, it would pay a handsome penalty for it, hence such a situation arising became highly unlikely. The Kraft management, led by Irene Rosenfeld also assured that Kraft had a great respect for Cadbury’s brands, employees and reputable history and therefore the employees of Cadbury would     do well in the new environment. Also, she verbally assured that under the new agreement the previous contractual rights of the employees would remain the same as before.

Advantages of the Takeover for Kraft

It was the biggest cross-border acquisition of that year. Such a deal clearly pushed Kraft as number 1 dealer in confectionery. A merger allowed Kraft to gain a footing in the fast growing chewing gum category.

Kraft management believes that the combination of the two companies is both a strategic as well as complimentary fit, boasting a portfolio of over 40 confectionery brands each having the ability to yield annual sales of over $100 million. A combination of Kraft products like Toblerone, Oreos and Ritz crackers with Trident gum and Dairy Milk chocolates from Cadbury would result in $625 million annual pretax cost savings on annual company costs of research and development, advertising, branding and procurement. There would also be a significant level of revenue synergy ($50 billion annually) that would subsequently result in higher earnings per share. After the takeover, Kraft would have a greater ability to compete with the giant Nestle on confectionery grounds by increasing its market share in Britain and enjoying the benefits of Cadbury’s strong geographical networking in Asia.

Kraft’s growth prospects would brighten through access to new brands particularly in the confectionary department along with new distribution channels for the existing products which are outside US. These constitute about one third of the market in developing countries such as Africa, China and India.

Advantages of the Takeover for Cadbury

Cadbury would profit from Kraft’s extensive distribution network around the globe. Cadbury had been vulnerable to a takeover ever since it demerged its US soft drinks business. This high takeover bid was an attractive opportunity to do away with such a fear. A combined Kraft and Cadbury would significantly expand the global reach of both businesses and create synergies worth in the region of $625m. Since a stand-alone Cadbury had limited opportunities for value creation , agreement to the contract for takeover seemed like a wise decision.

Negatives of the Takeover

Along with the obvious benefits come the many challenges and ethical issues. These are primarily high debt issues and employee layoffs.   The high debt position of Kraft has further worsened with the takeover as funds were borrowed to pay the Cadbury shareholders a higher yield. Kraft also sold off its frozen Pizza line in order to make the takeover happen.

The unions are worried that the jobs of hundreds would be at stake (estimated 9000 plus) as Kraft would try to reduce costs to operate efficiently and pay back its debts. The company has also not given any formal assurance that it would protect 4500 UK jobs. Also it is a known fact that when a company needs to cut costs, jobs and job conditions suffer.

The British Government also opposes takeovers of British companies by foreign giants as it nearly always leads to job losses. This takeover too was met with resistance including Gordon Brown’s advice and insistence against its happening but the shareholders overruled it and still went ahead with the deal. According to a Union head, “This is a very sad day for U.K. manufacturing. A successful, iconic, independent U.K. brand will now be owned by a giant company with massive debt.”

In the face of such a scenario, even if employees are laid off it will not affect those who are rich and/ or are major shareholders in the company.   For example, if the chairman, Roger Carr gets axed, he would still walk away with $30 million! This proves that it is the low level managers and employees who feel the vulnerability of such an action. According to David Bailey, professor at Coventry University Business School; “Serious questions need to be asked about Kraft’s intentions… Kraft already has a track record of cutting production and moving production abroad… There’s no guarantee that they’ll keep production in the UK in the long run.”

When employees of both companies were interviewed to ask about their view points, most expressed fear and uncertainty. They were resistant to the idea of such a large company where their positions and titles might be reduced or lost due to the massive structure. They are also despondent of their lack of involvement in this decision. According to one employee, “nobody really knows what is going to happen, but it is definitely not going to be pleasant.”

A disadvantage for Kraft’s shareholders of the takeover is that they now mentally feel less financially strong as assets were being sold and the entire pizza production plant worth $3.7 billion was sold to raise money for the takeover.

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Business Performance and Advantages of Takeover

• First Online: 04 May 2021

Cite this chapter

• Gillian Doyle 8 ,
• Richard Paterson 9 &
• Kenny Barr 10  

Part of the book series: Palgrave Global Media Policy and Business ((GMPB))

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In this chapter, we introduce our case studies and approach to the measurement of business performance. The focus of analysis is on the relationship between, on the one hand, expansion, scale and different sorts of corporate configurations (whether owned by a multinational parent company; vertically integrated or not) and, on the other, economic performance and capacity to engage in business strategies that sustain growth in a digital multiplatform distribution environment. This chapter draws heavily on self-originated quantitative analyses of a number of key aspects of business performance and on qualitative analysis of original material drawn from interviews with leading executives across the selected case studies to examine the business advantages conferred on production companies that are taken over and to examine how ownership and changes in ownership configuration correlate with business performance in the television production industry in the twenty-first century. The findings presented show how, from the perspective of production companies, takeover and business performance are seen as connected and in what ways takeover is perceived as generating valuable advantages that enhance the business performance of those production companies which are acquired.

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Doyle, G., Paterson, R., Barr, K. (2021). Business Performance and Advantages of Takeover. In: Television Production in Transition. Palgrave Global Media Policy and Business. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-63215-1_4

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• Corporate Finance

How Can a Company Resist a Hostile Takeover?

What Is a Takeover?

A corporate  takeover  is a complex business transaction pertaining to one company purchasing another company. Takeovers often take place for a number of logical reasons, including anticipated  synergies  between the acquiring company and the target company, potential for significant revenue enhancements, reduced operating costs, and beneficial tax considerations.

How Hostile Takeovers Work

In the U.S., most corporate takeovers are friendly in nature, meaning that the majority of key stakeholders support the acquisition. However, corporate takeovers can sometimes become hostile. A hostile takeover occurs when one business acquires control over a public company against the consent of existing management or its board of directors. Typically, the buying company purchases a controlling percentage of the voting shares of the target company and—along with the controlling shares—the power to dictate new corporate policy.

There are three ways to take over a public company: vertical acquisition , horizontal acquisition , and conglomerated acquisition . The main reason for the hostile execution of acquisition, at least in theory, is to remove ineffective management or board and increase future profits.

Strategies to Avert a Hostile Takeover

With this in mind, some basic defense strategies can be used by the management of potential target companies to deter unwanted acquisition advances.

Poison Pill Defense

The first poison pill defense was used in 1982 when New York lawyer Martin Lipton unveiled a warrant dividend plan; these defenses are more commonly known as shareholder rights plans. This defense is controversial, and many countries have limited its application. To execute a poison pill, the targeted company dilutes its shares in a way that the hostile bidder cannot obtain a controlling share without incurring massive expenses.

A "flip-in" pill version allows the company to issue preferred shares that only existing shareholders may buy, diluting the hostile bidder's potential purchase. "Flip-over" pills allow existing shareholders to buy the acquiring company's shares at a significantly discounted price making the takeover transaction more unattractive and expensive.

Such a strategy was implemented back in 2012 when  Carl Icahn  announced that he had purchased nearly 10% of the shares of Netflix in an attempt to take over the company.

The Netflix board responded by instituting a shareholder-rights plan to make any attempted takeover excessively costly. The terms of the plan stated that if anyone bought up 10% or more of the company, the board would allow its shareholders to buy newly issued shares in the company at a discount, diluting the stake of any would-be  corporate raiders  and making a takeover virtually impossible without approval from the takeover target. This plan would be in place for the next three years.

Staggered Board Defense

A company might segregate its board of directors into different groups and only put a handful up for re-election at any one meeting. This staggers board changes over time, making it very time-consuming for the entire board to be voted out.

White Knight Defense

If a board feels like it cannot reasonably prevent a hostile takeover, it might seek a friendlier firm to swoop in and buy a controlling interest before the hostile bidder. This is the white knight defense. If desperate, the threatened board may sell off key assets and reduce operations, hoping to make the company less attractive to the bidder.

Typically, the white knight agrees to pay a  premium  above the acquirer’s offer to buy the target company’s stock, or the white knight agrees to restructure the target company after the acquisition is completed in a manner supported by the target company’s management. 

Two classic examples of white knight engagements in the corporate takeover process include   PNC Financial Services' ( PNC ) purchase of National City Corporation in 2008 to help the company survive during the subprime mortgage lending crisis, and Fiat’s   takeover of Chrysler in 2009 to save it from  liquidation .

Greenmail Defense

Greenmail  refers to a targeted repurchase, where a company buys a certain amount of its own stock from an individual investor, usually at a substantial premium. These premiums can be thought of as payments to a potential acquirer to eliminate an unfriendly takeover attempt.

One of the first applied occurrences of this concept was in July 1979, when Carl Icahn bought 9.9 percent of Saxon Industries stock for $7.21 per share. Subsequently, Saxon was forced to repurchase its own shares at $10.50 per share to  unwind  the corporate takeover activity.

While the anti-takeover process of greenmail is effective, some companies, like Lockheed Martin   ( LMT ), have implemented  anti-greenmail provisions  in their corporate charters. Over the years, greenmail has diminished in usage due to the capital gains tax that is now imposed on the gains derived from such hostile takeover tactics.

Stocks With Differential Voting Rights

A preemptive line of defense against a hostile corporate takeover would be to establish stock securities that have differential  voting rights (DVRs). Stocks with this type of provision provide fewer voting rights to shareholders. For example, holders of these types of securities may need to own 100 shares to be able to cast one vote.

Establish an Employee Stock Ownership Plan

Another preemptive line of defense against a hostile corporate takeover would be to establish an  employee stock ownership plan (ESOP) . An ESOP is a tax-qualified retirement plan that offers tax savings to both the corporation and its shareholders. By establishing an ESOP, employees of the corporation hold ownership in the company. In turn, this means that a greater percentage of the company will likely be owned by people that will vote in conjunction with the views of the target company’s management rather than with the interests of a potential acquirer.

How the Williams Act Affects Hostile Takeovers

Hostile attempts to take over a company typically take place when a potential acquirer makes a  tender offer , or direct offer, to the stockholders of the target company. This process happens over the opposition of the target company’s management, and it usually leads to significant tension between the target company’s management and that of the acquirer.

In response to such practice, Congress passed the  Williams Act  to offer full and fair disclosure to shareholders of the potential target companies, and to establish a mechanism that gives additional time for the acquiring company to explain the acquisition’s purpose.

The Williams Act requires the acquiring company to disclose to the  Securities and Exchange Commission  the source of funds that will be used to accomplish the acquisition, the purpose for which the offer is being made, the plans the acquirer would have if it is successful in the acquisition, and any contracts or understandings concerning the target corporation. While the Williams Act was designed to make the corporate takeover process more orderly, the increased use of  derivative  securities has made the Act a less useful defense mechanism. As a result, various types of corporate defense strategies need to be considered by the management of companies likely to be targeted for acquisition.

The Bottom Line

Corporations have many hostile takeover defense mechanisms at their disposal. Given the level of hostile corporate takeovers that have taken place in the U.S. over the years, it may be prudent for management to put in place preemptive corporate takeover mechanisms, even if their company is not currently being considered for acquisition. Such policies should be seriously pursued by companies that have a well-capitalized balance sheet , a conservative income statement that exhibits high profitability, an attractive cash flow statement, and a large or growing market share for its products or services.

In addition, if the company exhibits significant  barriers to entry , a lack of competitive rivalry in the industry, a minimal threat of substitute products or services, minimal bargaining power of the buyers, and minimal bargaining power of the suppliers, the case for implementing preemptive hostile strategies while developing a thorough understanding of responsive takeover defense mechanisms is highly advised.

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• Mergers and Acquisitions (M&A): Types, Structures, Valuations 1 of 39
• Merger: Definition, How It Works With Types and Examples 2 of 39
• What Is an Acquisition? Definition, Meaning, Types, and Examples 3 of 39
• Why Do Companies Merge With or Acquire Other Companies? 4 of 39
• How M&A Can Affect a Company 5 of 39
• Mergers and Acquisitions: What's the Difference? 6 of 39
• The Corporate Merger: What to Know About When Companies Come Together 7 of 39
• Inorganic Growth: Definition, How It Arises, Methods, and Example 8 of 39
• What Is a Takeover? Definition, How They're Funded, and Example 9 of 39
• Mergers vs. Takeovers: What's the Difference? 10 of 39
• What Is a Takeover Bid? Definition, Types, and Example 11 of 39
• Hostile Takeover Explained: What It Is, How It Works, and Examples 12 of 39
• Hostile Takeovers vs. Friendly Takeovers: What's the Difference? 13 of 39
• What Are Some Top Examples of Hostile Takeovers? 14 of 39
• How Can a Company Resist a Hostile Takeover? 15 of 39
• Poison Pill: A Defense Strategy and Shareholder Rights Plan 16 of 39
• What Is an Reverse Takeover (RTO)? Definition and How It Works 17 of 39
• Reverse Mergers: Advantages and Disadvantages 18 of 39
• Reverse Triangular Merger: Overview and Advantages 19 of 39
• A Guide to Spotting a Reverse Merger 20 of 39
• How Does a Merger Affect Shareholders? 21 of 39
• How Company Stocks Move During an Acquisition 22 of 39
• What Happens to Call Options When a Company Is Acquired? 23 of 39
• Stock-for-Stock Merger: Definition, How It Works, and Example 24 of 39
• All-Cash, All-Stock Offer: Definition, Downsides, Alternatives 25 of 39
• Swap Ratio: What it is, How it Works, Special Considerations 26 of 39
• Acquisition Premium: Difference Between Real Value and Price Paid 27 of 39
• Understanding and Calculating the Exchange Ratio 28 of 39
• SEC Form S-4: Definition, Purpose, and Filing Requirements 29 of 39
• Special Purpose Acquisition Company (SPAC) Explained: Examples and Risks 30 of 39
• Bear Hug: Business Definition, With Pros and Cons 31 of 39
• Understanding Leveraged Buyout Scenarios 32 of 39
• Vertical Merger: Definition, How It Works, Purpose, and Example 33 of 39
• Horizontal Merger: Definition, Examples, How It Differs from a Vertical Merger 34 of 39
• Conglomerate Mergers: Definition, Purposes, and Examples 35 of 39
• Roll-Up Merger: Overview, Benefits and Examples 36 of 39
• The 5 Biggest Mergers in History 37 of 39
• The 5 Biggest Acquisitions in History 38 of 39
• 4 Cases When M&A Strategy Failed for the Acquirer (EBAY, BAC) 39 of 39

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A takeover (or acquisition) involves one business acquiring control of another business

Takeovers (or acquisitions as they are otherwise known) are the most common form of external growth , particularly by larger businesses.

Reasons for Undertaking Takeovers

There are many reasons why a firm may decide to undertake a takeover as part of its strategy, including to:

• Increase market share
• Acquire new skills
• Access economies of scale
• Secure better distribution
• Acquire intangible assets (brands, patents, trade marks)
• Spread risks by diversifying
• Overcome barriers to entry to target markets
• Defend itself against a takeover threat
• Enter new segments of an existing market
• Eliminate competition

Why Might Takeovers Be Preferred to Organic Growth?

Possible strategic reasons why takeovers might be the best option for a business include:

• Existing products are in the later stages of their life cycles, making it hard to grow organically
• The business (in particularly its management) lacks expertise or resources to develop organically
• Speed of growth is a high priority
• Competitors enjoy significant advantages that are hard to overcome other than acquiring them!

The Risks and Drawbacks of Takeovers

It is important to recognise that takeovers are the highest risk method of growth.

Many studies on the performance of takeovers have been completed over the years and they consistently show that a large percentage of takeovers destroy value for the shareholders of the acquiring firm (in other words - most takeovers fail).

The common drawbacks of takeovers include:

• High cost involved - with the takeover price often proving too high
• Problems of valuation (see the price too high, above)
• Upset customers and suppliers, usually as a result of the disruption involved
• Problems of integration (change management), including resistance from employees
• Incompatibility of management styles, structures and culture
• Questionable motives

Why Takeovers Fail

Among the main reasons why so many takeovers fail are:

• Price paid for takeover was too high (over-estimate of synergies)
• Lack of decisive change management in the early stages
• The takeover was mishandled
• Cultural incompatibility between the two businesses
• Poor communication, particularly with management, employees and other stakeholders of the acquired business
• Loss of key personnel & customers post acquisition
• Competitors take the opportunity to gain market share whilst the takeover target is being integrated
• External growth

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Top 5 Hostile Takeover Examples: How it Happened?

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

In previous article, with the help of insights from the M&A Science podcast , we put together a comprehensive guide to hostile takeovers .

Here, we'll focus on examples of companies that completed or at least attempted a hostile takeover of another firms and explain the reasons why.

Why Hostile Takovers Happen

Hostile takeovers happen because investors believe that companies are significantly undervalued, and that the current management lack the competence to address what they perceive as a misvaluation. Hence, they by step the management team, instead approaching the company’s shareholders about a takeover. The investors give the shareholders something to ponder: Are their shares undervalued, and if so, does the hostile takeover offer reflect the shares’ true value?

Below, we look at 5 examples of hostile takeovers over the years, and how the deals played out.

InBev’s acquisition of Anheuser-Busch

$52 billion

July 14, 2008

InBev was already the world’s largest brewer when it made an unexpected offer for Anheuser-Busch in June 2008. InBev had a portfolio of beverages that included Stella Artois and Beck’s, and the notion that it was now going to add Budweiser to the list appeared to greatly appeal to industry investors: The shares of both companies rose on the news that InBev had made its approach.

Despite offering a 30% premium over the share price, InBev’s offer was knocked back by the Anheuser-Busch directors.Ostensibly, this was because the price didn’t value their firm sufficiently. In reality, they were probably protecting their own interests. Undeterred, InBev upped the stakes by making a direct approach to Anheuser-Busch’s shareholders, asking them to submit a motion to the company that would fire its board members and replace them with an alternative board.

In the end, there was no need: When InBev increased its offer to $70 a share, the Anheuser-Busch board - under pressure from no less than Warren Buffett, then an investor in the company - rescinded. In the end, maybe only Anheuser-Busch’s shareholders were the only ones to benefit.While they gained a 40% premium over the share price, AmBev - the company formed by the takeover - has never thrived. At the time of writing over a decade later, its shares are priced lower than the time of the deal.

Oracle’s acquisition of PeopleSoft

$10.3 billion

December 13, 2004

PeopleSoft shares had been in free fall for nearly two years when Oracle first expressed an interest in an acquisition.From a high of $56, the shares were trading at around $15 in 2003. When PeopleSoft made a bid to acquire a rival software firm, JD Edwards, for $1.7billion, Oracle CEO sensed the time was right to make his move. Before the JD Edwards deal was confirmed, Oracle had made an offer of $16 per share - a premium of just 6%.

The PeopleSoft board squirmed. Probably still clinging to the notion that their company was worth closer to the original $52per share, they resisted the offer. And continued to do so for the following 18months. In fact, over that time, Oracle made ten separate offers, each one improving on the offer that preceded it. With 60% of shareholders already willing to sell out to Oracle, the PeopleSoft board finally gave in at $26.50 a share in December 2014.

For Oracle, the deal was an undoubted success:PeopleSoft probably was underpriced, even at the price that it eventually struck with shareholders. In addition to make it the global number two in the business application software market behind German rival SAP, PeopleSoft’s annual fees from clients for maintenance and updates was even higher than it had initially thought. As one analyst said at the time: “You can only compete with size,” and Oracle managed that.  

Sanofi-Aventis acquisition of Genzyme Corp

$20.1 billion

February 15 2011

The deal between Sanofi-Aventis and Genzyme Corpis regularly stated by textbooks as an example of a hostile takeover - possibly because a timeline of the deal leaves little doubt that a hostile takeover was the intention of Genzyme Corp from the outset. Just one month after having an initial approach of $18.5 billion turned down by Genzyme’s board of directors, Sanofi-Aventis returned with the exact same offer. A case of “this is your last chance.”

On the Genzyme side, its CEO Henri Termeer informed Sanofi CEO Chris Viehbacher in a letter that the deal “drastically undervalued the company.” No sooner had he done so than Vehbacher said that the offer might be taken direct to Genzyme’s shareholders. Shareholders initially backed Termeer, saying that they would only accept a bid for $75 per share(Sanofi’s opening gambit was $69 per share).

Eventually, five months after much back and forth between the two sides, Genzyme’s shareholders accepted a bid of $74 per share plus contingencies based on the company’s post-acquisition performance.When the deal closed, it gave Sanofi access to Genzyme’s patents for rare disease medicines, just as most of its own patent portfolio was expiring. To this day, the deal is the second biggest hostile merger in the biotech sector in history.

RBS and ABN Amro

$97 billion

10 October 2007

The 2007 takeover of Dutch bank ABN Amro by a consortium led by RBS could just as easily be listed under “disastrous acquisitions” and “be careful what you wish for” as hostile takeovers. A key detail in the deal is one that its price may have been inflated by the fact thatBarclays was also trying to acquire ABN Amro at the same time. The fact thatRBS “succeeded” where Barclays failed is already being seen as a historical turning point for the two British banks.

In 2007, with the global banking industry already looking to be in the mid set of a bubble, RBS led a consortium that also included Belgian bank Fotis and Spanish bank Santander to acquire ABN Amro. Perhaps riled by ABN Amro publicly stating that it preferred a deal withBarclays, it launched a hostile takeover bid. At a transaction price of $97billion, it was the biggest M&A transaction in the banking industry in history. Such honors rarely bode well.

In Q2 2008, the global financial crisis began and the rest is history. An inquest by the British government into the deal found that the RBS dealmakers relied on “two folders and a CD” for the deal’s due diligence . The debt pile brought as a result of the deal severely damagedRBS and it has never truly recovered. It now operates under the Natwest umbrella. In 2008, it topped out at 5,900 points on the London Stock Exchange. In 2022, it hovers close to 250.

Microsoft and Yahoo!

Date: Deal never closed

The fifth deal on our list is a deal that never was: Microsoft’s $45 billion acquisition of Yahoo! in 2008. When Microsoft went public with its first offer in February 2008, it had already been in informal discussions with Yahoo for the previous two years. Yahoo! was seen as something of a basket case at the time, continuously shedding workers, issuing profit warnings, and generally showing an inability to offer any answer to Google’s domination of internet search.

Over the next two months, the publicity generated by Microsoft’s offer brought others on board, including Google, AOL, and NewsInternational. Yahoo! flirted with all four, only one of which (Microsoft)retained any interest. Apart from… shareholder activists. In May, Carl Icahnand T Boone Pickens acquired a combined $1.25 billion in Yahoo! stock in an attempt to force the board to sell to Microsoft.

It was all to no avail. Yahoo!’s management instead entered a partnership agreement with Microsoft around internet advertising, which largely went nowhere. The company was subsequently sued by its shareholders (led by Carl Icahn) who were able to prove that the board of directors had planned to reject Microsoft’s offer well in advance of it arriving, thus neglecting their fiduciary responsibility to shareholders.

All about M&A: Discover more interesting M&A stories

For the inside track on deals like these and others, as well as value creating tips and insights into modern dealmaking, take a closer look at our partner site M&A Science .

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Gulf Oil Corp.--Takeover

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Gulf oil corp.--takeover description.

Gulf Oil was pressured into liquidation while under attack by Boone Pickens of Mesa Petroleum Co. Gulf management was unsure whether to sell out or take the firm private. A suitor, Standard Oil of California, tries to decide how much, if anything, to bid for the privilege of owning Gulf.

Case Description Gulf Oil Corp.--Takeover

Strategic managment tools used in case study analysis of gulf oil corp.--takeover, step 1. problem identification in gulf oil corp.--takeover case study, step 2. external environment analysis - pestel / pest / step analysis of gulf oil corp.--takeover case study, step 3. industry specific / porter five forces analysis of gulf oil corp.--takeover case study, step 4. evaluating alternatives / swot analysis of gulf oil corp.--takeover case study, step 5. porter value chain analysis / vrio / vrin analysis gulf oil corp.--takeover case study, step 6. recommendations gulf oil corp.--takeover case study, step 7. basis of recommendations for gulf oil corp.--takeover case study, quality & on time delivery.

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Case Analysis of Gulf Oil Corp.--Takeover

Gulf Oil Corp.--Takeover is a Harvard Business (HBR) Case Study on Finance & Accounting , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Gulf Oil Corp.--Takeover is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Gulf Oil Corp.--Takeover case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Gulf Oil Corp.--Takeover will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

Gulf Oil Corp.--Takeover case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Finance & Accounting, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Gulf Oil Corp.--Takeover, is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The Gulf Oil Corp.--Takeover case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Finance & Accounting Solutions

In the Texas Business School, Gulf Oil Corp.--Takeover case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Gulf Oil Corp.--Takeover

Step 1 – Problem Identification of Gulf Oil Corp.--Takeover - Harvard Business School Case Study

The first step to solve HBR Gulf Oil Corp.--Takeover case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Gulf Oil is facing right now. Even though the problem statement is essentially – “Finance & Accounting” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Gulf Oil, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Gulf Oil Corp.--Takeover. The external environment analysis of Gulf Oil Corp.--Takeover will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Gulf Oil Corp.--Takeover case study. PESTEL analysis of " Gulf Oil Corp.--Takeover" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Gulf Oil Corp.--Takeover macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for Gulf Oil Corp.--Takeover

To do comprehensive PESTEL analysis of case study – Gulf Oil Corp.--Takeover , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact Gulf Oil Corp.--Takeover

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ Gulf Oil Corp.--Takeover ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Gulf Oil is operating, firms are required to store customer data within the premises of the country. Gulf Oil needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Gulf Oil Corp.--Takeover has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Gulf Oil in case study Gulf Oil Corp.--Takeover" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Gulf Oil in case study “ Gulf Oil Corp.--Takeover ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Gulf Oil in case study “ Gulf Oil Corp.--Takeover ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ Gulf Oil Corp.--Takeover ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Gulf Oil can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Gulf Oil Corp.--Takeover case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Gulf Oil needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact Gulf Oil Corp.--Takeover

Social factors that impact gulf oil corp.--takeover, technological factors that impact gulf oil corp.--takeover, environmental factors that impact gulf oil corp.--takeover, legal factors that impact gulf oil corp.--takeover, step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: gulf oil corp.--takeover case study solution.

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Elon Musk & Twitter: The case study of all case studies

By Rebecca Zucker Partner, Next Step Partners

Leadership Lessons on what NOT to do: Elon Musk & Twitter

In the few weeks since Elon Musk took over Twitter, many of us have been on the sidelines watching a business school case study unfold that will be taught for decades…and waiting to see what he does next. First, he cut half of Twitter’s 7,500 employees and then promptly realized he needed some of them, asking some to come back. Whoops. 

Elon then issued an ultimatum that remaining employees would need to commit to a “hardcore” Twitter or leave. He said, “This will mean working long hours at high intensity,” continuing that “only exceptional performance will constitute a passing grade.” Employees were given 24 hours to decide. 

Simultaneously, he revoked the company’s policy that allowed employees to work remotely on a permanent basis and required employees to work onsite (never mind that many employees who opted into this remote policy moved out of commuting range to Twitter’s offices). He has since walked back on this edict. He then cut off badge access for everyone, accidentally locking himself out. Whoops again. 

Where do I even begin in breaking down this epic failure in leadership? There is so much wrong here it’s mind-blowing. Here are 7 leadership failures fueling this colossal dumpster fire that we can all learn from:

Hardcore isn’t motivating

First, let’s start with the word “hardcore.” More than just a poor choice of words, it reeks of insecure bravado. I can’t think of a more “tech bro” term that would instantly turn people off and alienate them – even actual tech bros. Despite an economy that’s in the process of shifting from an employee to employer market, after a pandemic and the great resignation where people have been exhausted and depleted, looking for improved work-life balance and more meaningful work where they can feel valued, I don’t think most people would be excited to opt into a “hardcore” work environment, or hardcore anything for that matter. Turnarounds and restructurings require hard work, but hard work doesn’t have to mean “hardcore.” It’s a marathon, not a sprint.

No inspirational vision

Without an inspiring vision for where Elon plans to take the company (or any vision, for that matter) – and clear communication of said vision – employees are left scratching their heads in confusion around not only what’s happening in the present, but also having no picture painted for them of where the company is ultimately headed, versus being enrolled and motivated to pursue something big and exciting, where they’d want to – or would even consider, for that matter – working long hours or to strive for “exceptional” performance. One employee who opted out, when given the choice last week, tweeted that he left because “I no longer knew

what I was staying for…There was no vison shared with us. No 5-year plan like at Tesla…There were rumors that the new vision might be radically different…And there was no communication from leadership to dispel them or set the vision.” 

Impossible and ambiguous standards

Now, let’s address Elon’s seemingly impossible, ambiguous, and highly subjective standard of “ exceptional performance.” What does this actually mean? If something is the exception, then it’s not the norm. Does this mean you need to rate as an A+ player to stay on as an employee? Be in the top 10%? Top 2%? If these are the passing grades, then most will fail. That’s not exactly motivating. How will employees’ contributions be evaluated? Are there actual, measurable goals? Do they have a say in creating those goals? Do they have the resources to achieve those goals? All totally unclear. When he says, “only exceptional performance will constitute a passing grade,” it sounds more like a vague threat where, let’s face it, Elon could fire someone because he doesn’t like the socks they wore that day. 

Corporate bullying

While Elon has technically given his remaining employees a choice – a very binary choice – he made them choose under duress with a ridiculously tight deadline. No one likes to be strong-armed or bullied into a decision or to have their livelihood or career toyed with. Bullies are inherently insecure people who pick on others more vulnerable than them to feel stronger or better about themselves. An estimated 1,200 of his remaining employees left as a result of his ultimatum and this number will likely continue to tick up. A good number of those who chose to stay likely did so because they either needed the paycheck or their work visas would be in jeopardy if they opted out. Either way, his bullying behavior invokes a sense of powerlessness or loss of agency or control in the remaining employees. You want people to feel like they want to be there, and not like they have to be there.

Impulsive and reckless decision-making

I’m all for being decisive and taking swift action, but not without being informed. There’s value to be had in soliciting the input of those closest to the actual work. Elon’s impulsive and reckless decisions, such as immediately firing the whole accessibility engineering team, its curation team that helps address misleading or false claims, and content moderators who track hate on the platform, have caused real problems. In the days since his takeover and following these firings, I personally noticed the floodgates open, unleashing antisemitic, racist, and vulgar content that seemed to come out of nowhere. It was noticed by advertisers, too, many of whom left as a result, jeopardizing the 90% of company revenues that come from advertising. Mostly, his extreme haste shows a fundamental lack of curiosity and desire to listen, a lack of humility and an abundance of hubris. This combination doesn’t tend to work out well for anyone.

Destruction of psychological safety

In firing those who publicly and privately disagreed with him – going as far as tasking his team members with combing through tweets to look for employees who didn’t agree with him – he sent a clear message of “If you disagree with me, you will be fired.” That somehow, disagreement was a personal betrayal or treasonous in some way. Firing people who disagree with you is more than enough to instill a culture of fear, shut people down, and have them not speak up when there’s a real problem – which will, in turn, result in more problems. Guaranteed. Being able to openly dissent and engage in constructive conflict – and engage in collaborative problem solving – are critical elements of high-performing teams. Lack of psychological safety is not only a culture killer, but also is likely to amplify and multiply problems down the road.

Un-inclusive and illegal actions

Elon’s actions were not only un-inclusive, but also illegal. His initial firing of half of the company’s workforce violated regulations that require large companies to provide 60 days’ notice. Further, demanding that employees work intensely for long hours is discriminatory to disabled workers, workers with children or other caregiving responsibilities (most likely to be women), etc. 

While Elon Musk’s modus operandi may be to “move fast and break things,” he may very well break the whole company and the limited number of employees he has left. The silver lining here is that Elon Musk has given us multiple leadership lessons to examine and learn from – most notably on what not to do – and there will likely be more to come.

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Adani Group vs NDTV: The tale of hostile takeovers in Indian corporate industry

There have been several instances of hostile takeovers in indian corporate history. however, only two such attempts resulted in the change of ownership a hostile takeover occurs when a company or a person attempts to take over another company against the wishes of the target company's board or management.

The news of business tycoon Gautam Adani taking over the New Delhi Television Ltd (NDTV) news channel has come as a major shock for the viewers with people calling it a "hostile takeover". This is because, the news channel has claimed that the 29.18% of NDTV has been acquired without "discussion, consent or notice".

Asia's richest man Adani launched a hostile takeover of media giant NDTV , first with an indirect acquisition of a 29.18% stake in the broadcaster followed by an offer to buy out a further 26% controlling stake. NDTV said the debt was converted into equity without any input from the founders or the company.

This will be the ports-to-energy group's most high-profile bet in the media sector where Mukesh Ambani already has a sizeable presence through Network18, which runs a bouquet of channels, including news channel CNN-News18 and business channel CNBC-TV18.

Last year, Adani Media Ventures Ltd (AMVL), the media arm under the group's flagship Adani Enterprises Ltd (AEL), had acquired the digital business news platform Quintillion Business Media Pvt Ltd (QBM).

The news has again put a spotlight on the topic of "hostile takeover" in the Indian corporate industry .

So what exactly is "hostile takeover"?

A hostile takeover occurs when a company or a person attempts to take over another company against the wishes of the target company's board/management. That is the "hostile" aspect of the hostile takeover- merging with or acquiring a company without the consent of that company's board of directors.

How a hostile takeover is done?

Let's say company 'A' submits a bid offer to purchase company 'B'. And, company 'B' rejects the offer, saying it to not be in the best interest of shareholders.

However, company 'A' attempts to force the deal through various methods: a proxy vote, a tender offer, or a large stock. A tender offer is an offer to buy shares from a shareholder of an acquirer business at a higher price than the market price.

A proxy vote is when an acquiring firm persuades current shareholders to vote out the target company's management so that it can be taken over more easily.

In Adani Group vs NDTV's case, the former chose to acquire the channel by purchasing large stocks. 

Hostile takeover cases in India

There have been several instances of hostile takeovers in Indian corporate history. However, only two such attempts resulted in the change of ownership.

India Cements successfully takeover Raasi Cements

This is one of the classic examples of a hostile takeover in the Indian business industry resulting in the ultimate acquisition of the traget by a hostile bidder occurred in 1998 when BV Raju sold his 32% stake in Raasi Cements to India Cements.

L&T and Mindtree acquisition

This was the second successful takeover after India Cement's successful takeover of Raasi Cement.

Larsen and Toubro Ltd (L&T) gained a controlling interest in Mindtree Ltd, raising its stake to 60% in the Bengaluru-based company in 2019.

L&T completed buying the 31% additional stake it targeted to acquire in Mindtree for ₹ 4,988.82 crore through an open offer as large investors rushed to sell their holdings.

The 60% stake in Mindtree gives L&T complete control over the software company’s board and management.

The purchase of additional shares through an open offer by L&T after acquiring a 20.4% stake in Mindtree from coffee baron VG Siddhartha and affiliate firms marked the culmination of a year-long effort by the Mumbai-based engineering giant to gain control of Mindtree through a hostile bid.

How a company can prevent a hostile takeover?

• The white Knight: If the target business's board believes it won't be able to avert a hostile takeover, it can look for a friendlier company to buy a controlling position in the company before the hostile bidder does. For example, in 2001 when stockbroker Radhakishen Damani made an open offer for BAT-controlled VST Industries, ITC entered the fray as a white knight, with support from BAT.

Real estate firm GESCO took the help of Mahindra and Mahindra in 2000 to prevent a hostile bid by Dalmia Group.

• Greenmail: Greenmail is a defense in which the target business buys back its own stock from the acquirer at a higher price.
• Crown Jewels: The target company reduces its attractiveness to the buyer by selling off its most valuable asset, which may have initially attracted the acquirer. The target firm might use this technique in conjunction with a white knight.
• Poison Pills: It is a strategy in which the target firm dilutes its shares to the point where the acquirer cannot gain a controlling position without paying significant costs.

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Anglo American rejects £31bn takeover offer from mining rival BHP

All-share proposal had potential to be one of biggest deals in sector for decade but deemed ‘opportunistic’

• Business live – latest updates

The board of Anglo American , the London-listed mining company, has rejected a “highly unattractive” £31bn takeover approach from its Australian rival BHP.

BHP’s all-share proposed offer for Anglo American had the potential to be one of the biggest deals in the global mining sector for a decade but has attracted criticism from Anglo’s shareholders as being too low and “highly opportunistic”.

Anglo American said in a statement that its board had unanimously rejected BHP’s approach because it “significantly undervalues” the company and its future prospects.

It also added that the structure of BHP’s proposal, which required Anglo American to complete two separate demergers, was “highly unattractive”.

Stuart Chambers, the chair of Anglo American, called the BHP proposal “opportunistic” and said the structure of the plans meant that potential risks of the transaction would be borne mainly by Anglo’s investors.

Anglo American dashed BHP’s hopes after a volley of criticism from some of the company’s biggest shareholders within hours of the initial proposal on Thursday. The plans were criticised by Anglo investors including Legal & General Investment Management, one of its largest shareholders, and Abrdn as being “highly opportunistic” and “unattractive”.

Anglo is likely to face further pressure from its new shareholder, the activist fund Elliott Investment, which has built a roughly $1bn (£800m) stake in the company in recent months. The fund led by Paul Singer is one of Anglo’s top 10 shareholders, according to Bloomberg, which first reported Elliott’s stake. Elliott and Anglo American declined to comment.

South Africa’s mining minister, Gwede Mantashe, also signalled he was against the takeover plan. Anglo American’s largest shareholder is the South African state asset manager, the Public Investment Corporation, which holds about 7% of Anglo’s shares, and a significant number of its mines are in South Africa.

Anglo American, which has a market value of about £34bn, has long been seen as a takeover target as its share price has lagged behind rivals. Last December, its shares plummeted after it cut its copper production forecasts because of difficulties at its mines in Peru and Chile. Its shares were roughly unchanged in early trading on Friday at £25.60.

The proposed BHP offer came as miners race to corner the market for copper, which is in high demand within the clean energy sector. Anglo investors would have received 0.7097 BHP shares for each Anglo share, valuing each Anglo share at £25.08. BHP also said it would undertake a strategic review of Anglo American’s other operations, including its diamond business post completion.

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A foreign takeover of Anglo American, one of the largest companies on the FTSE 100, would deal a further blow to London’s financial market, hastening the exodus of London-listed companies to other bourses.

BHP moved its primary listing from the UK to Australia in 2022, and a takeover of Anglo American would have meant the London Stock Exchange losing one of its 25 largest companies at a time when companies such as Tui are planning to leave London to list elsewhere.

Under takeover rules, BHP must make a firm offer for Anglo American by 22 May or walk away.

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BHP move to buy Anglo American threatens to hasten City exodus

BHP’s takeover bid for Anglo American is clever but far too low

UK packaging firm DS Smith agrees £5.8bn takeover by US group

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Lessons from Beyoncé on Navigating Exclusion

• Ella F. Washington,
• Hildana Haileyesus,
• Laura Morgan Roberts

The star’s path from CMA Awards backlash to Cowboy Carter is a case study in strategic response.

In 2016, Beyoncé’s performance at the CMA Awards sparked backlash from fans complaining about everything from her attire to her lack of connection to the genre. This year, she released her first country album, which debuted at number one on the Billboard 200. Her actions over the past eight years have been a case study in how to navigate workplace exclusion. As a first step, it often makes sense to exit the conversation and wait for a better moment to respond. Then, work behind the scenes, ideally with collaborators, to push for change. Finally, consider focusing on your own authenticity and strengths to create your own lane within your organization or outside it.

Beyoncé, the globally revered singer, songwriter, and entrepreneur, last month released her new album Cowboy Carter.   However, this project is much more than another musical release from a leading star. It offers a case study in how to navigate workplace exclusion.

• Ella F. Washington  is an organizational psychologist; the founder and CEO of Ellavate Solutions, a DEI strategy firm; and a professor of practice at Georgetown University’s McDonough School of Business. She is the author of  The Necessary Journey: Making Real Progress on Equity and Inclusion  (HBR Press, November 2022) and  Unspoken: A Guide to Cracking the Hidden Corporate Code  (Forbes Books, May 2024). 
• Hildana Haileyesus  is a DEI consultant at  Ellavate Solutions with a background in training and facilitation, client strategy, and research. She has worked across higher education and business and applies a sociological lens to equity-driven change efforts.
• Laura Morgan Roberts is a Frank M. Sands Sr. Associate Professor of Business Administration at the University of Virginia’s Darden School of Business. She is an organizational psychologist and the coeditor of Race, Work and Leadership: New Perspectives on the Black Experience (Harvard Business Review Press, 2019).

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Moderna and OpenAI partner to accelerate the development of life-saving treatments.

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Moderna partners with OpenAI to deploy ChatGPT Enterprise to thousands of employees across the company. Now every function is empowered with AI, creating novel use cases and GPTs that accelerate and expand the impact of every team.

Moderna has been at the intersection of science, technology, and health for more than 10 years. Moderna’s mission is to deliver the greatest possible impact to people through mRNA medicines—with the COVID-19 vaccine being their most well-known breakthrough. 

The company has partnered with OpenAI since early 2023. Now, ChatGPT Enterprise is evolving how Moderna operates across each function.

Moderna is using its platform for developing mRNA medicines to bring up to 15 new products to market in the next 5 years—from a vaccine against RSV to individualized cancer treatments. In order to achieve its ambitions, Moderna has adopted a people-centric, technology-forward approach, constantly testing new technology and innovation that can increase human capacity and clinical performance.

We believe very profoundly at Moderna that ChatGPT and what OpenAI is doing is going to change the world. We’re looking at every business process—from legal, to research, to manufacturing, to commercial—and thinking about how to redesign them with AI.

Moderna brings AI to everyone

Moderna adopted generative AI the same way Moderna adopts other technology: with the mindset of using the power of digital to maximize its positive impact on patients. To allow AI to flourish, they knew they needed to start with the user and invest in laying a strong foundation for change.

Moderna’s objective was to achieve 100% adoption and proficiency of generative AI by all its people with access to digital solutions in six months. “We believe in collective intelligence when it comes to paradigm changes,” said Miller, “it’s everyone together, everyone with a voice and nobody left behind.” For this, Moderna assigned a team of dedicated experts to drive a bespoke transformation program. Their approach combined individual, collective and structural change management initiatives.   

Individual change management initiatives included in-depth research and listening programs, as well as trainings hosted in person, online and with dedicated AI learning companions. “Using AI to teach AI was key to our success”, Miller points out. Collective change management initiatives included an AI prompt contest to identify the top 100 AI power users who were then structured as a cohort of internal Generative AI Champions. Moderna’s culture of learning led to local office hours in every business line and geography, and scaled through an internal forum on AI, which now has 2,000 active weekly participants. Lastly, structural change management initiatives included engaging Moderna’s CEO and executive committee members to foster AI culture through leadership meetings and town halls as well as incentive programs and sponsored events with internal and external experts.  

 This work led to an early win with the launch of an internal AI chatbot tool, mChat, at the beginning of 2023. Built on OpenAI’s API, mChat was a success, adopted by more than 80% of employees across the company, building a solid foundation for the adoption of ChatGPT Enterprise.  

90% of companies want to do GenAI, but only 10% of them are successful, and the reason they fail is because they haven’t built the mechanisms of actually transforming the workforce to adopt new technology and new capabilities.

Building momentum with ChatGPT Enterprise

With the launch of ChatGPT Enterprise, Moderna had a decision to make: continue developing mChat as an all-purpose AI tool, or give employees access to ChatGPT Enterprise?

“As a science-based company, we research everything,” said Brice Challamel, Head of AI Products and Platforms at Moderna. Challamel’s team did extensive user testing comparing mChat, Copilot, and ChatGPT Enterprise. “We found out that the net promoter score of ChatGPT Enterprise was through the roof. This was by far the company-favorite solution, and the one we decided to double down on,” Challamel said.  

Once employees had a way to create their own GPTs easily, the only limit was their imaginations. “We were never here to fill a bucket, but to light a fire,” Challamel said. “We saw the fire spread, with hundreds of use cases creating positive value across teams. We knew we were on to something revolutionary for the company.”

The company’s results are beyond expectations. Within two months of the ChatGPT Enterprise adoption: 

• Moderna had 750 GPTs across the company
• 40% of weekly active users created GPTs 
• Each user has 120 ChatGPT Enterprise conversations per week on average

Augmenting clinical trial development with GPTs

One of the many solutions Moderna has built and is continuing to develop and validate with ChatGPT Enterprise is a GPT pilot called Dose ID. Dose ID has the potential to review and analyze clinical data and is able to integrate and visualize large datasets. Dose ID is intended for use as a data-analysis assistant to the clinical study team, helping to augment the team’s clinical judgment and decision-making.

 “Dose ID has provided supportive rationale for why we have picked a specific dose over other doses. It has allowed us to create customized data visualizations and it has also helped the study team members converse with the GPT to further analyze the data from multiple different angles,” said Meklit Workneh, Director of Clinical Development at Moderna. 

Dose ID uses ChatGPT Enterprise’s advanced data analysis feature to automate the analysis and verify the optimal vaccine dose selected by the clinical study team, by applying standard dose selection criteria and principles. Dose ID provides a rationale, references its sources, and generates informative charts illustrating the key findings. This allows for a detailed review, led by humans and with AI input, prioritizing safety and optimizing the vaccine profile prior to further development in late-stage clinical trials. 

“The Dose ID GPT has the potential to boost the amount of work we’re able to do as a team. We can comprehensively evaluate these extremely large amounts of data, and do it in a very efficient, safe, and accurate way, while helping to ensure security and privacy,” added Workneh.

Improving compliance and telling the company’s story

Moderna’s legal team boasts 100% adoption of ChatGPT Enterprise. “It lets us focus our time and attention on those matters that are truly driving an impact for patients,” said Shannon Klinger, Moderna’s Chief Legal Officer. 

Now, with the Contract Companion GPT, any function can get a clear, readable summary of a contract. The Policy Bot GPT helps employees get quick answers about internal policies without needing to search through hundreds of documents. 

Moderna’s corporate brand team has also found many ways to take advantage of ChatGPT Enterprise. They have a GPT that helps prepare slides for quarterly earnings calls, and another GPT that helps convert biotech terminology into approachable language for investor communications. 

“Sometimes we’re so in our own world, and AI helps the brand think beyond that,” explained Kate Cronin, Chief Brand Officer of Moderna. “What would my mother want to know about Moderna, versus a regulator, versus a doctor? How do we tell our story in an effective way across different audiences? That’s where I think there’s a huge opportunity.”

A team of a few thousand can perform like a team of 100,000

With an ambitious plan to launch multiple products in the next few years, Moderna sees AI as a key component to their success—and their ability to stay lean as a business while setting new benchmarks in innovation. 

“If we had to do it the old biopharmaceutical ways, we might need a hundred thousand people today,” said Bancel. “We really believe we can maximize our impact on patients with a few thousand people, using technology and AI to scale the company.” 

Moderna has been well positioned to leverage generative AI having spent the last decade building a robust tech stack and data platform. The company fosters a culture of learning and curiosity, attracting employees that excel in adopting new technologies and building AI-first solutions.

By making business processes at Moderna more efficient and accurate, the use of AI ultimately translates to better outcomes for patients. “I’m really thankful for the entire OpenAI team, and the time and engagement they have with our team, so that together we can save more lives,” Bancel said.