A buyout is when a person or company buys the majority of shares, i.e. a controlling interest, in another company. This means they control the majority of votes at the annual meeting, can impact the board of directors, and influence other company decisions.
Posts Tagged ‘controlling interest’
A Buyout is…
Friday, August 21st, 2009Controlling Interest is…
Thursday, August 20th, 2009Controlling interest refers to the possession of over 50% of the voting shares of a particular company. Having control of a company is basically like getting the majority vote.
What’s so hostile about a corporate takeover?
Tuesday, June 23rd, 2009Normally, someone can’t buy something from you without your permission – a guy can’t just walk into your living room, throw down a wad of cash, and make off with your sofa. You’d expect the same principle to apply to corporations: if you own a company, how can someone else buy it if you won’t sell it to him? But depending on the type of company you own, another individual or corporation can actually buy it without your permission, in a maneuver called a hostile takeover.
If your company is private, you don’t have to worry about hostile takeovers, because the company’s owners (you/your partners/your fellow members on the board of directors) have a controlling interest in the stock. But in a public company, although the board of directors may have the single biggest chunk of shares, the majority of the shares are dispersed among the general public. Think of each share as something like a vote. If someone wants to become the owner of your company, all he has to do is collect the most votes – it doesn’t matter if he has your votes or not, as long as he has more votes than you do. So what he can do is appeal to the public, and offer to buy their votes (their shares) for a higher price than they could get for those shares on the stock market. If enough shareholders take him up on his offer, the company becomes his – in other words, he’s completed a hostile takeover. So it turns out that in the world of finance, people can actually buy something of yours… whether you like it or not.