Evaluating the Shareholders Wealth Consequences in Defeating Hostile Essay

Evaluating the Shareholders Wealth Consequences in Defeating Hostile Takeovers of UK Companies - Essay ExampleChanges in the structure and organisation of a conjunctions operations may be reflected in performance data, but these data provide little indication of the nature and extent of the structural changes. Changes in the functions performed within the company, the harvest-festival mix, the availability of finance, input sources, industrial relations and many more qualitative aspects of the companys operations may also have significance for the long-run development of the acquired company which would not be reflected in relatively short-run performance data (Ashcroft & Love, 1993, p. 39).An example of a companys effort to substantiate changes through a hostile putsch is that of Olivetti. This Italian industrial giant was long known as a typewriter and office machine company, which almost failed in the 1980s. With the entry of several US competitors in the late 1980s, Olivetti fo und itself in hot water as it is being toppled down by IBM, Dell, Toshiba, and Compaq. The solution was not obvious, though one business that Olivetti entered in the 1980s, telecommunications, has circleed out to be the one in which the company is trying to bet its future. With the bold bid for Telecom Italia in 1998, Olivetti launched one of the first study hostile ingestover bids in Europe. After successfully overcoming the strong opposition of Telecom Italias board and an attempt to recruit Deutsche Telekom as a white knight, Olivetti did take control of the telecommunications company. Now it remains to be seen if Olivetti really can remake itself as a leading telecommunications company moving into the twenty-first century (Raghavan and Naik, 1999).In occasions of hostile putschs, the final decision of whether to allow it rests with the stockholders. In an earlier time, they were largely individuals whose purpose in investing was to earn dividends and hope the stock would adv ise in value so they could sell it at a gain for their retirement. Such little investors in our era have been replaced by giant investing funds managed by shrewd professionals with sophisticated computer programs to guide their decisions. They work for mutual funds, pension funds, and other large-volume investors with billions of dollars that they must keep working for the benefit of their shareholders or members (Loughran & Vigh, 1997).As there are already strong takeover defences presently available to corporations, shareholders do not have claim to decide whether or not proposed takeover offers are in the best interests of the company. Unfortunately, managerial decision-making may become conflicted for any number of reasons when the company becomes a target for takeover. The burden of proof to channelize theres no conflict of interest is clearly on the shoulders of the management of the target company. Fact is that any expenditure to defend the company from a hostile takeover n eed to be ultimately justified by enhanced shareholder value. Apparently, during takeovers, the management represents the company, regardless of whether or not it would be more beneficial if shareholders accept a takeover offer and reinvested the offer value (Neis, 1997). It could also happen that management could overestimate its own ability to create value for shareholders and mistakenly turn down superior offers. Another dilemma that deserves more careful review is that management owning a substantial number of