A friendly takeover is a scenario in which a company is acquired by another company with the approval of the target company’s management and board of directors. In a friendly takeover, the management of the target company generally supports the transaction and recommends it to shareholders.
The process typically begins with the acquiring company making a proposal to the target company’s board of directors. The board and management then evaluate the proposal. If they believe the offer is in the best interests of the company and its shareholders, they will recommend the deal.
Following this, the acquiring company will make a tender offer, which is a formal proposal to buy the shares of the target company. The shareholders of the target company then have the opportunity to sell their shares on the terms offered.
An example of a friendly takeover is the acquisition of Pixar by The Walt Disney Company in 2006. Disney and Pixar had a long history of collaboration, and the acquisition was a mutual decision made by the boards and management teams of both companies. The deal was recommended to the shareholders and completed successfully.
This contrasts with a hostile takeover, where the acquiring company makes a direct offer to the shareholders of the target company without the consent or approval of the target company’s management and board of directors.
Example of a Friendly Takeover
Let’s look at a historical example of a friendly takeover:
In 2016, Microsoft acquired LinkedIn in a friendly takeover. Microsoft proposed to buy LinkedIn for $26.2 billion in cash, the largest acquisition in Microsoft’s history at that time. LinkedIn’s board of directors and management team agreed to the terms of the offer and recommended it to their shareholders.
Microsoft’s management saw great value in LinkedIn’s extensive professional network and data, while LinkedIn expected to benefit from Microsoft’s wide array of business products and services.
The acquisition was carried out in a cooperative and transparent manner, and it was completed in December 2016. LinkedIn has continued to operate as a separate entity under Microsoft, maintaining its distinct brand and culture.
This example demonstrates how a friendly takeover can provide strategic advantages for both the acquiring and the target company when their goals and visions align.