A Research On The Hostile Takeover Of Company

As one type of corporation takeover bid, hostile takeover is the acquisition that happens under the circumstance that the acquirer doesn't negotiate or agree with the target company's management, facing the objection or the anti-acquisition actions from the target company's management. The main characteristic of hostile takeover is that the acquirer becomes the shareholder of the target company through purchasing stocks from the target company's shareholders, resulting in the changes of stock ownership in terms of its legal effects.Through hostile takeover the agency costs can be reduced by replacing the inept executives. In the mean time, it leads to economies of scale and synergetic effects. However, hostile takeover unavoidably aggravates the market fluctuation. Hostile takeover itself is neutral. It is only one of the means for the superior to win and for the inferior to be washed out.Main issues of hostile takeover include information disclosure, medium and small shareholder protection system, and anti-acquisition regulations. In order to protect the interests of the target company investors, hostile takeover information is disclosed through the share alerting system, the offer disclosing system, and the board information publicizing system of the target company. The 5% alert disclosure point of our country's securities regulations exhibits the tradeoff between the investors'interests and public interests. But the effects of this (information disclosure) system need to be inspected in that public market acquisition is still lack of necessary practice under the whole circulation background. Offer disclosing system is the key of corporate acquisition system. Its basic rule is to make the target company shareholders, especially medium and small ones, obtain all information that possibly affects their investment decisions. Our current legislation is still not adequate in this aspect. In some particular cases, the securities administration and the stock exchanges can request the acquirer to assure the comprehensiveness of information disclosure in view of specific situations. The target company board information publicizing system is still blank in our country's securities acts, which is the defect of legislation. In order to assure that the target company executives are loyal to the company's and shareholders'interests, it is necessary to legislate for that system in our securities acts. The protection of medium and small shareholders can be realized by means of mandatory offer, shareholder withdrawal, mandatory purchase of remained stocks, anti-acquisition restriction, and prohibition of insider trade, etc. Since our capital market is a newly developing market and the hostile takeover just emerges, the practice of these specific systems is still an issue open to discussions. With regard to the anti-acquisition regulations in hostile takeover, our country's shareholder- meeting- oriented anti-acquisition behavioral model is in accord with our current legislative practice and reality. When choosing the anti-acquisition steps, the target company should consider the current legislation background and strive for the maximization of company value. The decision makers should take effective reactions on behalf of all shareholders, especially medium and small shareholders. To medium and small shareholders, hostile acquisition is not necessarily a"monster". On the contrary, it may improve the company's governance and efficiency. From the viewpoint of legislation rationale, we should encourage instead of restrict hostile takeover in our country.