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Simple English definitions for legal terms
Takeover
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A quick definition of Takeover:
A takeover is when one party gains control of a company from another party. This can happen in two ways: friendly or hostile. In a friendly takeover, the company being taken over agrees to the terms of the takeover. In a hostile takeover, the company being taken over does not agree to the takeover. The party trying to take over the company must file a report with the Securities Exchange Commission (SEC) if they own more than 5% of the company's stock. They must also release a tender offer to buy shares from other shareholders. The success of the takeover depends on whether enough shareholders agree to sell their shares. Takeovers happen for different reasons, such as diversifying a company's industry or removing competition. However, all takeover attempts must receive clearance from the FTC to ensure that a monopoly will not result.
A more thorough explanation:
A takeover is when one party gains control of a corporation from another party. There are two types of takeovers: hostile and friendly. In a hostile takeover, the management of the company being taken over does not want to be taken over. In a friendly takeover, the management of the company being taken over agrees to the takeover.
Company A wants to take over Company B. Company A buys more than 5% of Company B's stock and files a report with the Securities Exchange Commission (SEC) saying that they intend to take over Company B. Company A then releases a tender offer to buy Company B's shares for a set price. In a hostile takeover, Company A releases the tender offer to the public and tries to convince shareholders to sell their shares. In a friendly takeover, Company A negotiates with Company B's management and holds a shareholder vote to determine if the takeover will be successful.
Takeovers happen for many reasons, including diversification, corporate raiders, and removing competition. However, all takeover attempts must receive clearance from the FTC to ensure that a monopoly will not result.
For example, if a company that makes soft drinks wants to take over another company that makes soft drinks, the FTC might not allow the takeover because it could create a monopoly in the soft drink industry. This would be bad for consumers because there would be less competition and prices could go up.