Hostile Takeover Essay
Hostility in Takeovers: In the Eyes of the Beholder?
G. WILLIAM SCHWERT* ABSTRACT
This paper examines whether hostile takeovers can be distinguished from friendly takeovers, empirically, based on accounting and stock performance data. Much has been made of this distinction in both the popular and the academic literature, where gains from hostile takeovers result from replacing incumbent managers and gains from friendly takeovers result from strategic synergies. Alternatively, hostility could ref lect strategic choices made by the bidder or the target. Empirical tests show that most deals described as hostile in the press are not distinguishable from friendly deals in economic terms, …show more content…
The Journal of Finance
to be some economic gains from combining the operations of the bidder and target. Stulz ~1988! discusses the relation between strategic and entrenchment motives for resistance by target management in response to a takeover offer. Some laws and contracts depend on the distinction between hostile and friendly takeover attempts. For example, the Wall Street Journal ~16 May 1996! reports that Aon Corp. began selling “Hostile Takeover Defense Insurance,” designed to reimburse companies for the costs associated with warding off a hostile takeover bid or a proxy fight with dissident shareholders. Likewise, Mitchell and Netter ~1989! argue that a proposed tax bill that would have