Hostile Takeover

Hostile takeover is a new phenomenon and new trend that have been derived from the recent development process of Chinese capital market. The so called"hostile takeover"meaning the which goes against the wishes of the target company's management and board of directors, opposite of friendly takeover. Traditional hostile takeover theory considers hostile takeover as kind of the enterprise control market; the existence of hostile takeover and the effective operation of this market can form an external monitoring mechanism for the company's management, effectively solve the proxy problem caused by the separation between the enterprise's ownership and control rights. Yet, this theory has been facing the challenge and questioning from relevant research and social reality. This essay takes the Game Theory perspective, considering company acquisition process as a process of a Game. Hostile takeover in itself embodies as the takeover entity optimizes its strategy in order to choose the best result during the process of Gaming. The laws of hostile takeover home and abroad indicate that the market system change, enterprise system change, the presence of the entrepreneur's opportunist behaviors, as well as the recognition of hostile takeover have prepared the prerequisites for the born and development of hostile takeover. The hostile takeover in Chinese market has been developing rapidly since its first appearance in 1993, but it is still at the start-up stage, hostile takeover is expected to be recognized in the near future. This essay is composed with five chapters: Chapter one is Introduction that brings up the topic and gives comments on relevant documents; chapter two sums up the relevant concepts of hostile takeover; chapter three analyzes the cost and benefit of hostile takeover, and discusses the essence of hostile takeover using the Game Theory; chapter four starts from the history of hostile takeover's development in UK and US, discuss further and deeper about the reasons of the born and development of hostile takeover; chapter five concentrates on the discussion of the issues of hostile takeover in China, analyzes the current status of hostile takeover's development and future trend in China, thus providing suggestion and reference to Chinese government and enterprises about the responding measures towards hostile takeover.