If a company is taken over by another company, what happens to the shareholders of the taken over company? do they have to sell their shares and do they lose out?pls i really don't know and need help...
2006-12-07 17:49:33 · 5 answers · asked by head2toe 1 in Business & Finance ➔ Investing
When a company goes "public" and sales shares in their business, the shares they sale are owned by the shareholders until they decide to sale. When/if the business sales, it does not effect the shareholders in any way, all they own is shares in the business, not the actual the business! One problem, if the new owners dont make as much productivity as the old the shares will go down in value! On the other hand, they could go up! Evaluate new owners and make decision to sell or retain shares! Hope this helps!
2006-12-07 18:09:31 · answer #1 · answered by kjesko 2 · 0⤊ 0⤋
It's very simple. In a Friendly takeover the big company talks to the small company and the small company's board of directors (board of directors of public companies are appointed by votes of the shareholders) will hash out the deal. The board of the small company will try to get what's best for their shareholders. The shareholders then vote for or against the takeover/buyout. If the vote passes the shareholders get one, both, or a choice between the two types of payouts. Cash at a price determined in the deal and/or your stock converted into the bigger companies stock at a ratio that is also determined in the deal.
Hostile takeovers are done through the larger company buying up so many shares of the smaller that they control enough voting rights to vote the takeover to happen. There is allot of mrkt regulation on this however I believe the large company has to announce what they are doing at some point and usually place a "tender offer" to buy the shares from the existing shareholders at whatever price the big company can get a majority of shareholders to sell at.
2006-12-08 07:16:14 · answer #2 · answered by manny c 2 · 0⤊ 0⤋
When a company is taken over by another company many things can happen depending on the type of take over.
Two types of takeovers are cash base and stock swaps.
Cash based usually is for small companies.
For stock swaps the acquiring company figures out the exchange ratio or swap ratio say x:y, x shares of the acuquirer for y shares of the acquiree. Whic is equitable.
Then there are junk bond financed acquisition and leveraged buy outs in which case you might get a cheque in the mail for the stock you hold which per se is non equitable or transparent. Now adays transparency is not very important right? Junk bonds financed acquisitions are not allowed nowadays much since they are financial tornados being high risk and high yielding.
Most of the times in US the market gains information of it early and the stocks rises and you can sell into this risen market else wait for the check in the mail which is naive because your reinvestment returns can be higher if you sell early at a premium. Some times the acquirer will offer a premium for your shares when the bid for the company in the open market especially if the takeovers turn out to be hostile.
2006-12-08 03:53:19 · answer #3 · answered by Mathew C 5 · 0⤊ 0⤋
There is NOT necessarily a trade off of shares at all as mentioned above. Could be an all cash deal. Either way the shareholders do not lose out as they get cash and/or shares in the other company. Depends on the merger agreement.
2006-12-08 09:19:34 · answer #4 · answered by vegas_iwish 5 · 0⤊ 0⤋
If the selling company has not done into bankruptcy, the existing shares of stock will convert to the new company,s stock at it's current value. example--old co. 5 shares@$5=$25
new co. 5 shares @$10=$50
2006-12-08 02:02:07 · answer #5 · answered by badbill1941 6 · 0⤊ 0⤋