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Chapter 5: Q9DQ. (page 648)

Suggest some ways in which firms have tried to avoid being part of a target takeover

Short Answer

Expert verified

Reduction in cash position, allotment of higher dividends, buying back outstanding shares, purchasing other companies, offering shares to the employee are some ways in which firms have tried to avoid being a part of a target takeover.

Step by step solution

01

Explanation of Takeover Tender Offer

Under takeover tender offer, one business entity attempts to purchase the target business entity without the intention of the target entity.

02

Methods to avoid target takeover

The target takeover can be avoided in the following ways:

  • Reducing the existing cash balance will help in avoiding leveraged takeover.
  • Issuing higher dividends to the shareholders will increase the shareholders' wealth and maximize their satisfaction.
  • Buyback of the shares will enable the business to reduce outstanding shares of the business and increases the earning per share of the business.
  • Purchasing another company will increase the overall size of the company.
  • Employees should be promoted to buy the shares of the business.

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