Regardless of whether you believe your company could one day become the target of a hostile takeover bid, it’s never too soon to prepare.
Although the markets have staged a bit of a comeback from recessionary levels, “When stocks sell for well below their peak prices, more companies find themselves in the crosshairs for unsolicited takeover bids,” say M&A attorneys Frank Aquila and Samantha Lipton from Sullivan & Cromwell, in Practical Law (The Journal).
Icahn and Lions Gate; Kraft and Cadbury; Sanofi and Genzyme: these well publicized battles help illustrate the current appetite for takeovers.
While this blog post will not help you make a decision about whether a takeover bid is the right move for your company and its shareholders, it should help you avoid some common pitfalls of being caught unprepared.
According to Aquila and Lipton, and based on our own experience at PondelWilkinson and with numerous client companies, boards should have fundamental plans in place to “lay the groundwork for an appropriate response” long before an unsolicited bid surfaces. Among basic steps:
- Be alert to potential hostile situations from existing shareholders, particularly those that have increased their positions.
- Know your shareholders and their histories.
- Engage with your largest shareholders, and foster open dialog.
- Review your company’s current defensive stance and strategic plan.
- Look at change-in-control restrictions and financial alternatives.
- Assemble a team from a wide range of disciplines, not only to ensure you have a full understanding of current legal, regulatory and market developments in M&A, but to ensure you have process in place to evaluate the situation calmly and unemotionally. The team, which should include key company officers, legal counsel, a financial advisor, and an investor relations firm, can be called to action immediately after a questionable inquiry is made and certainly if a bid is received.
Being prepared will allow you to respond quickly and decisively in the
event of a takeover bid, which will, ultimately, instill shareholder confidence
and help you achieve the company’s long- term objectives.
— Laurie Berman, email@example.com