Today’s hectic market conditions have led to a dramatic increase in the number of hostile takeover bids, which should suggest to directors that they prepare for such a possibility.
A report released yesterday by the Conference Board Governance Center provides a checklist of issues for directors to consider in the event of an unsolicited takeover offer.
Some 47 percent of merger activity in 2009 was accomplished by means of hostile takeovers, up from 24 percent in 2008. “Today’s market conditions permit some companies to be ‘put in play’ more easily than before,” says Frederick H. Alexander, author of the report.
Certain company conditions, such as undervalued share prices and liquidity issues, can invite “bargain hunting” by acquirers. Certain pro-shareholder measures taken over the last few years, such as the elimination of poison pills, may have weakened these companies’ defense against takeover, according to the report.