A hostile takeover generally occurs when an organization is underperforming, and members of the top management team are not taking appropriate action to correct known issues. An individual or group may take advantage of the organization’s low stock price in these situations to purchase a large enough number of shares to gain control. While these types of buyouts are referred to as hostile, this doesn’t necessarily mean the intent is malicious – and can be quite the opposite. Usually, these types of actions are chances for invested parties to make necessary changes to the organization and potentially save it from failing. Typically following these takeovers, stock prices will increase (Berk & DeMarzo, 2017).
There are many views as to whether hostile takeovers are beneficial or consequential, and it likely depends on one’s view of the role of various stakeholders within the organization, or their part in the HT. As mentioned by Bower and Paine in “The Error at the Heart of Corporate Leadership,” the idea that management must act in the interest of stakeholders is not healthy for organizations, and instead they should be focused on acting upon interests of the organization itself, instead. This essentially implies that stockholders don’t have any real claim to the actions of the company, and a hostile takeover aimed at improving health of the organization could be beneficial for stockholders. Another source argues that stockholders should have a more involved say in actions of leadership, and that hostile takeovers can strip those rights away – leaving the door open for ethical dilemmas – namely the likelihood of benefit of the few and high risk for loss to the majority (Kinsella, 2017). Employees and communities are also affected by these types of takeovers, especially if the threat of reorganization or relocation are included in the plan to right the corporate ship. In summary, HTs could be beneficial or not, depending on each stakeholders place in the deal and the intent of the purchasing entity.
Salesforce recently announced its acquisition of Tableau – a company specializing in technology that helps drive decision making. In this example, the acquisition – which is being completed as an all stock exchange – is likely positive as employees and customers will receive added support and access thanks to vast resources that come with being part of Salesforce. Tableau’s press release even says the change will “supercharge” what Tableau is capable of. While the future of current employees isn’t mentioned, this may be an issue during the takeover as teams could be consolidated.
Berk, J., and DeMarzo, P. (2017). Corporate Finance: The Core. Boston, MA: Pearson.
Bower, J., and Paine, L. (2017). The Error at the Heart of Corporate Leadership. Harvard Business Review.
Kinsella, M. J Bus Ethics. (2017). Retrieved from:146: 771. https://doi.org/10.1007/s10551-016-3256-x
Tableau Press Release, 6/10/2019 – https://investor.salesforce.com/press-releases/press-release-details/2019/Salesforce-Signs-Definitive-Agreement-to-Acquire-Tableau/default.aspx