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Corporate takeovers occur readily in the United States and in the United Kingdom. They do not happen often in Germany because of the dual board structure, in Japan because companies have interlocking sets of ownerships known as keiretsu or in the People's Republic of China because the state majority-owns most publicly listed companies there.
There are a variety of reasons that an acquiring company may wish to purchase another company. Some takeovers are opportunistic: the target company may simply be very reasonably priced, for one reason or another, and the acquiring company may decide that in the time period that's important to it, it will end up making money by purchasing the target company, because of its normal profitability. The massive holding company Berkshire Hathaway seems to have profited very well over time by purchasing many companies opportunistically in this way.
Other takeovers are strategic in that they are thought to have secondary effects beyond the simple effect of the profitability of the target company being added to the acquiring company's profitability. For example, an acquiring company may decide to purchase a company that is profitable on its own accord but also has good distribution capabilities in new areas which the acquiring company can utilize for its own products as well. A target company might be attractive because it allows the acquiring company to enter a new market with a running start, without having to take on the risk, time, and expense of starting a new division that would compete in this new market. An acquiring company could decide to take over a competitor not only because the competitor is profitable, but in order to eliminate competition in its field and make it easier, in the long term, to raise prices; or in the belief that the combined company can be more profitable than the two companies would be separately due to a reduction of redundant functions; or, if an acquiring company has a major competitor it wants to attack, it may purchase a target company which already competes with that major competitor in some other area or product line.
Critics often charge that very large companies execute takeovers in order to boost their reported revenueIn business, revenue is the amount of money that a company actually receives from its activities, mostly from sales of products and/or services to customers. To investors, revenue is less important than profit or income which is the amount of money the bu (sales to customers), without giving sufficient regard to profitProfit is what is gained, after costs are accounted for. In accounting, this is usually measured in monetary terms. In economics, profit is most often measured differently, since costs are opportunity costs. Profit is income received by buying low and sel, which generally takes a hit when a company is acquired because of all the costs involved, and because a premium is always paid if the target company is financially healthy and not already desperate to be taken over. The widespread belief in this criticism is demonstrated by the fact that a takeover announcement typically drives up the stock price of the target company, and forces down that of the acquiring company.
The target company has several methods to avoid a takeover, if it wishes. These include legal actions, as in the case of the Hewlett-PackardThe Hewlett-Packard Company ( NYSE: HPQ , commonly known as HP is a very large, global company headquartered in Palo Alto, California, United States. Its products are concentrated in the fields of computing, printing, and digital imaging. It also sells so purchase of CompaqCompaq Computer Corporation was founded in February 1982 by Rod Canion, Jim Harris and Bill Murto, three senior managers from semiconductor manufacturer Texas Instruments. Each invested $1,000 to form the company. Their first venture capital came from Ben, or the use of a poison pillPoison pill is a term referring to any strategy, generally in business or politics, which attempts to avoid a negative outcome by increasing the costs of that outcome to those who seek it. This is a reference to literal poison pills (actually often vials, as set up by TransmetaTransmeta is a US-based corporation that makes energy efficient x86 microprocessors. To date, it has produced two x86 compatible CPU architectures: the Crusoe and Efficeon processors. These CPUs have appeared in ultra-portable Laptops, Blade servers, Tabl.
Most dot-comDot-com (also dotcom or redundantly dot. com companies were the collection of start-up companies selling products or services using or somehow related to the Internet. They proliferated in the late 1990s dot-com boom a speculative frenzy of investment in companies were created for the express purpose of being taken over with a consequent immediate profit for their owners, as opposed to the usual purpose of creating a business: to create profit for its owners over time by generating cash which is paid in dividendA dividend is the distribution of profits to a company's shareholders. The primary purpose of any business is to create profit for its owners, and the dividend is the most important way the business fulfills this mission. When a company earns a profit, sos.