Definition of Hostile Takeover

A hostile takeover is the acquisition of a company called a target company by the acquiring company directly from the owners of the target company. The nature of the takeover is hostile because the management of the target company is not willing to let the acquisition happen. The acquirer directly talks to the majority shareholders to make the acquisition happen by offering them a lucrative settlement in cash or giving them ownership in the joint company after the acquisition.

The target company management can use various defensive strategies to prevent a hostile takeover. Poison pilling refers to the intentional acts by the target company’s management to make the takeover difficult. Such actions might include shares performance looking poor, or disclosure of litigation associated with the target company that the acquirer has to settle after the takeover.