Understanding Hostile Takeovers

Corporate law covers many important areas that affect how companies are formed, managed, and regulated. One of the most interesting and sometimes controversial topics in this field is the hostile takeover. A hostile takeover happens when one company tries to acquire another company without the approval of the target company’s management. This article explains what hostile takeovers are, how they work, why they happen, and what legal protections companies use to defend themselves.

What Is a Hostile Takeover?

In a simple merger or acquisition, one company buys another with the full agreement of both management teams. This type of deal is called a friendly takeover.

A hostile takeover, on the other hand, occurs when the acquiring company approaches the shareholders directly, or tries to replace the board of directors in order to gain control. The target company’s management does not want the deal to happen, usually because they believe:

• The offer undervalues the company

• The acquisition may harm employees or operations

• The acquiring company may not have good intentions

Hostile takeovers often become intense battles involving negotiations, legal actions, and defensive strategies.

Why Do Hostile Takeovers Happen?

There are several reasons why one company may attempt a hostile takeover:

1. Undervalued Companies

If the acquiring company believes the target company is undervalued in the stock market, it might try to buy it at a lower price and later benefit from its real potential.

2. Strategic Advantages

Sometimes the target company has something the acquiring company wants—such as new technology, market access, patents, or strong customer networks. A takeover helps them gain that advantage quickly.

3. Control Over Competition

In some industries, companies attempt hostile takeovers to reduce competition. By acquiring a rival, they can expand their market share.

4. Financial Gains Professional investors or private equity firms may pursue hostile takeovers simply because they believe they can restructure the target and resell it for a profit.

How Does a Hostile Takeover Work?

A hostile takeover generally happens through one of two methods:

1. Tender Offer

This is the most common method. The acquiring company makes an offer directly to the target company’s shareholders to buy their shares at a higher price than the current market value. This premium is designed to convince shareholders to sell, even if management opposes the deal.

For example, if a company’s share price is ₹100, the acquiring company may offer ₹130 per share.

If enough shareholders agree, the acquirer gains control.

2. Proxy Fight

In a proxy fight, the acquiring company asks shareholders to vote out the existing board of directors and replace them with individuals who support the takeover.

It is called a “proxy fight” because shareholders give someone else (a proxy) the right to vote on their behalf. If the acquirer succeeds, the new board will approve the takeover, making it no longer hostile.

Defensive Strategies Against Hostile Takeovers

Companies facing a hostile takeover have several legal tools to defend themselves. These strategies are sometimes dramatic and creative, but they must always follow corporate laws and governance rules.

1. Poison Pill

This is one of the most famous defenses. A poison pill allows existing shareholders to buy more shares at a discount if a hostile acquirer buys a certain percentage of the company.

This dilutes the value of the acquirer’s shares, making the takeover more expensive and difficult.

2. White Knight

The target company may look for another friendly company to buy it instead. This friendly buyer is called a white knight, stepping in to “rescue” the company from the hostile acquirer.

3. Crown Jewel Defense The company sells or transfers its most valuable assets (the “crown jewels”) to reduce its attractiveness. However, this must be done carefully because it can hurt long-term value and may lead to shareholder lawsuits.

4. Golden Parachute

This strategy offers large financial benefits to top executives if they are removed after a takeover. The goal is to make the acquisition more expensive and discourage the hostile bidder.

5. Staggered Board

A staggered board means only a portion of the board members are up for election each year. This makes it harder for an acquirer to quickly replace all board members in a proxy fight.

Legal and Ethical Issues

Hostile takeovers involve not just business strategy but also important legal and ethical questions.

1. Shareholder Rights

Shareholders may receive a good premium in a hostile takeover. Some benefit financially, so laws often prioritize shareholder interests.

2. Board’s Duty

Directors have a legal duty to act in the best interest of shareholders. If they reject a takeover bid without good reason, they may face legal challenges.

3. Market Competition

Regulators sometimes stop takeovers if they reduce competition too much. Anti-trust laws prevent one company from becoming too powerful in a market.

4. Impact on Employees

Hostile takeovers often lead to job cuts or restructuring. This raises ethical concerns about employee rights and job security.

Recent Examples of Hostile Takeover

Some well-known companies have been involved in hostile takeover attempts. For example:

1. NDTV — taken over by Adani Group (2022–2023)

   In 2022, Adani Group (via its subsidiary Vishvapradhan Commercial Private Limited or VCPL) acquired a 29.18% stake in NDTV by converting convertible warrants held since 2009 without the consent or prior notice to the channel’s founders/promoters. Shortly thereafter, Adani launched a mandatory open offer to public shareholders and obtained an additional stake. By December 2022, the original promoters sold ~27.26% of their shares, enabling Adani to gain majority control (over 64% stake) in NDTV. This takeover is widely labeled a hostile takeover because the original founders and management objected to the acquisition path, claiming it happened “without discussion, consent or notice.”

2. Mindtree — taken over by Larsen & Toubro (L&T) (2019)

   In 2019, L&T acquired a controlling stake in Mindtree — raising its share to around 60% despite resistance from Mindtree’s promoters and management. This is often described as the first hostile takeover in India’s IT sector. The takeover began when a significant investor, V.G. Siddhartha, sold his ~20.3% stake in Mindtree. L&T then increased its shareholding through open market purchases and a mandatory open offer to shareholders. After the acquisition, Mindtree was later merged with L&T’s IT arm and rebranded as LTIMindtree (in 2022), marking the end of Mindtree as a standalone listed company.

3. Beacon Roofing Supply takeover by QXO (2024–2025)

   In a high-value takeover, QXO launched a hostile bid for Beacon Roofing Supply, offering a large premium over the pre-bid share price. The bid represented a major takeover, one of the largest in a slow M&A environment and showed that aggressive acquisition strategies remain in play even today. The offer threatened to replace Beacon’s board of directors, which is a classic feature of a hostile takeover.

   
   

4. E.W. Scripps Company vs Sinclair Broadcast Group (2025)

   In November 2025, Sinclair Broadcast Group made a bid to acquire Scripps by offering around US$538 million, seeking to buy the remaining shares they did not own. Scripps responded by adopting a “shareholder rights plan” often called a “poison pill”  to block/control the takeover attempt. The move shows how boards may react defensively: by making the acquisition prohibitively expensive or difficult if done without board approval.

Conclusion

Hostile takeovers remain relevant today even in a regulatory and governance environment that is more conservative than decades ago. Both tender-offer takedowns and takeover bids via buyouts. Poison pills, legal injunctions, and proxy fights remain staple defence tools for companies eyed by aggressive bidders. Not all hostile-like moves are classic takeovers. Sometimes firms attempt to gain control or influence via board-level pressure or proxy fights.