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Expansion Through Takeover of Company

Takeover is the purchase of one company (the target) by another (the acquiring company or the acquirer). In this strategy the acquiring company or the acquirer purchases controlling stake in the targeted company. Through this the acquirer/ acquiring company can exercise control over board and control business operation. Key feature of Takeover strategy is "total control over business of target company", this can be advantageous to the acquirer/ acquiring company for expansion if the target company is selected strategically to complement its business.

The process of friendly takeover is typically comprises the following list of steps.

Step 1. Find a Target Company


Selecting a target entity for a Takeover is a vital task. As success of deal depends on how you select your target entity for acquisition. It must comply with the objective of a deal.
  Short listing of Target Companies
 Analysis of Target Company
 Finalising Target Company
 
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Step 2. Sign a MoU / Term sheet


After selecting target company for acquisition there is need to sign MoU (Memorandum of understanding) which helps in getting access to information of target entity for making due diligence, valuation etc.  
Approx.
2 weeks
Step 3. Valuation


Valuation is a process of determining the value of an asset or business. It is one of the most important aspects of a Takeover process as target company wants maximum valuation for its business whereas acquirer wants it at lowest end. Valuation of business is mandatory for listed public limited company.

 
Approx.
2 weeks
Step 4. Due Diligence


Due diligence is a deep analysis of a target entity's business before Done acquiring it. However statutorily though it is not mandatory, it is advisable to do Due diligence of the target before taking final calls for takeover and determine its valuation. Following are the different elements of due diligence.
...more details
 
Approx.
4 weeks
Step 5. Structure Your Deal


A deal should be structured considering agreement between buyer and seller. It should be time, cost and compliance efficient and as required under the law.
While structuring a deal following factors must be taken into consideration
  Objective of the Deal
 Transaction Cost Involved
 Discharge of Consideration
 
Approx.
2 weeks
Step 6. Post Acquisition Integration


Post-acquisition integration refers to the aspect of an organizational takeover that involves combining the original socio-technical systems of two different entities. As per study 85% of failed/troubled acquisitions are due weak post acquisition integration.
 
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