Posts Tagged ‘hostile takeover’

Anti-Trust Cops Anti-Nasdaq/NYSE Takeover

Tuesday, May 17th, 2011

policia.jpeg
(photo credit: banspy)

What happens when the two largest stock exchanges in the U.S. become one big mega-exchange? A monopoly, that’s what! In case you don’t remember from history or economics class (or the game Monopoly), a monopoly is when one company controls an entire market, making it hard or impossible for smaller companies to fairly compete. (The market, in this case, being the market of stock markets.)

That’s why anti-trust regulators at the Justice Department have shut down Nasdaq’s attempted hostile takeover of the New York Stock Exchange. The takeover is hostile because the NYSE already has a deal with German bank Deutsche Borse to be acquired for $10 billion, and it’s so not interested in starting a relationship with Nasdaq right now.

The New York Stock Exchange and Nasdaq have been competing for years, which keeps them both in customer-pleasing, price-cutting mode. Without that competition, NYSEasdaq could charge whatever it wanted and still crush what little competition would be left.

It could even become… too big to fail!

What’s so hostile about a corporate takeover?

Tuesday, June 23rd, 2009

Normally, 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.