Reference no: EM131899248

Discussion 1

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A hostile takeover is a type of corporate acquisition or merger which is carried out against the wishes of the board of directors and usually the management of the target company. In a hostile takeover, the target company's board of directors rejects the offer, but the bidder continues to pursue the acquisition.

A bidder may initiate a hostile takeover through a tender offer, which means that the bidder proposes to purchase the target company's stock at a fixed price above the current market price. Another method of a hostile takeover is acquiring a majority interest in the stock of the company on the open market. If that is impossible or just too expensive, a bidder may initiate a proxy fight.

According to Investopedia (2018), "In a proxy fight, opposing groups of stockholders persuade other stockholders to allow them to vote their shares. If a company that makes a hostile takeover bid acquires enough proxies, it can use those proxies to vote to accept the offer" (p. 1). In this case, Berk &DeMarzo, (2017), stated "with a new superior management team, the stock is a much more attractive investment, which would likely result in a price rise and a profit for the corporate raider and the other shareholders" (p. 13).

Before the fact, their stock price tends to rise, as the acquisition target pumps up its stock price to make the acquisition more difficult and expensive for the predator. Consequently, the targets of hostile takeovers don't usually have a post-takeover market stock price. If for some reason, a publicly-traded minority was left, there would be a couple different opposing influences on the price. The willingness of the acquiring corporation to pay a market premium to acquire a control block would signal that the target was undervalued, to begin with, but the presence of a control block would tend to drive the price of minority shares down.

A takeover is likely to be perceived as negative if the company has a sentimental value that is they have close ties with the founder of the business. However, this may not be the case for all shareholders and often, a shareholder will determine the success of a takeover or merger in terms of financial possibility such as if they will receive a good price for their shares or whether they will continue to hold a stake in the company.

A case of a recent merger included Amazon announcing to acquire Whole Foods for $13.7 billion. According to Turner & Spencer (2017), the main issues in the merger is "the deal sends shockwaves across both the online and brick-and-mortar industries. Grocery chains plunged on Friday -- Wal-Mart Stores Inc. fell as much as 7.1 percent, while Kroger Co. tumbled 17 percent -- as investors worried that woes will mount in the increasingly cutthroat industry" (p. 1). This merger will benefit Amazon in a way that will catapult the e-commerce giant into hundreds of physical stores and fulfill a long-held goal of selling more groceries.

Discussion 2

Corporate raider can purchase a significant portion of the company's stock and acquire enough votes to replace the board of directors or CEO. Usually, stocks go after a hostile takeover because the stock is seeming as more attracted since new management has taken over. Although hostile takeover sounds terrible, it works for the benefits of the shareholders because the board member starts acting in the best interest of the of the shareholder and the employees of the company start to do their job more efficiently( Berk, J. B., &DeMarzo, P. M. (2017).

Community Bank, N.A., is a thriving, growing community bank headquartered outside of Syracuse, New York and one of the largest community banks based in Upstate New York with approximately $10.7 billion in assets. However, they wanted to grow and expand outside of New York.

Community Bank decided to do this they have to take over some business. And so they did three of them to be exact and two in the same year. Community Bank completed the acquisition of Northeast Retirement Services in February 2017 and completed the acquisition of Merchants Bancshares (MBVT) in May 2017 and Oneida Financial Corp. in 2015. With the purchase of Merchants Bank, Community Bank entered Vermont and Western Massachusetts and had dominant market shares in much of Upstate NY and Northeast PA.

The merger is likely to benefit the all the stakeholders (employees, customer, and shareholders) because Decentralized local decision-making, branch managers act as regional bank presidents and strong liquidity approx. 250,000 shares traded daily. Community Bank ranked the 6th best in an analysis of America's best and worst large banks by Forbes Magazine.

References

Berk, J. B., &DeMarzo, P. M. (2017). Corporate finance (4th ed.). Boston, MA: Pearson. ISBN: 9780134202648