'Preparation is the best defence'. If there is one context in which this expression rings truer than most, it is in 'Responding to a Takeover Bid'.
One of the worst scenarios that a company could find itself is to be unprepared for a takeover bid. Without a readily available and robust system for responding to unsolicited takeover bids – in particular, a hostile bid – statements could be made by officers or employees of the target company that could:
- prejudice the company's ultimate response strategy;
- limit the company's future actions;
- mislead the market;
- provoke unwanted selling by long-term or cornerstone investors; and
- expose its directors to personal liabilities.
The difficulty of course is that there is no such thing as an 'optimal' takeover response system. As discussed in Addisons' publication, 'Responding to a Takeover Bid', a company must maintain appropriate flexibility when it comes to assessing a takeover offer, not only to maximise shareholder value but also to ensure that the board and management are doing – and seen to be doing – the 'right thing' for all shareholders and not simply "defending at all costs".
In 'Responding to a Takeover Bid', Addisons explores some common issues that the board of a target company is likely to face in the event of an unsolicited takeover bid, including:
- what considerations the board should have regard to in developing its strategy and tactics for responding to a takeover bid;
- what preparatory systems should be established to identify key potential bidders and to deter inadequate bids;
- what actions should and should not be taken when a takeover offer is first received;
- what duties and responsibilities does a director owe or have in the event of a takeover bid; and
- what should be included in a Target's Statement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
