How Hostile Takeovers Occur in Practice – An Overview of Strategies and Defense Measures

A hostile takeover is one of the most intense and risky scenarios in modern business. It occurs when one company acquires another without the approval of management or the board of directors. Unlike friendly mergers, where all parties cooperate, a hostile takeover often develops into a fierce battle, with both sides using all available means.

What defines a hostile takeover?

The core of a hostile takeover is its definition: it is carried out without management’s consent. A potential buyer recognizes that acquiring the company makes economic sense—whether to eliminate a troublesome competitor, strengthen market position, or profit from an undervalued company. Unlike traditional mergers, which begin with negotiations and mutual agreement, a hostile takeover takes a much more aggressive approach.

Such hostile scenarios occasionally occur in the cryptocurrency industry, especially when established Bitcoin miners attempt to acquire competitors. Newer crypto projects like Sponge V2 are less vulnerable to such attacks because they primarily focus on building investor trust.

Three classic methods of hostile takeover

The practical implementation of a hostile takeover follows proven patterns. There are three main approaches:

Tender Offer: This is the most common method. The buyer makes a direct offer to the target company’s shareholders to sell their shares at a price above the market value. This bypasses management entirely and aims to gain control by purchasing a majority of shares.

Creeping Takeover: Here, the potential acquirer gradually and discreetly buys shares on the open market. These smaller transactions are designed not to attract immediate attention. Once a significant stake is accumulated, the buyer reveals themselves and attempts to pressure management.

Proxy Fight: In this approach, the buyer does not negotiate with management but directly with the board and shareholders. The goal is to have them vote to replace the current management at the next annual meeting with new leaders who are more favorable to the takeover.

How target companies defend against hostile attacks

When a hostile takeover is imminent, the attacked company can employ various defense strategies. The most important include:

Poison Pills: This classic defense involves actions such as issuing new shares to make the takeover prohibitively expensive or impossible. Alternatively, the company can sell its most valuable assets to make itself less attractive to the attacker.

Searching for a White Knight: The threatened management actively seeks another buyer who is more favorable. This so-called White Knight might make a friendlier takeover offer and thus displace the hostile bidder.

Public and Political Campaigns: The attacked company mobilizes key shareholder groups and reaches out to the media to organize broad public opposition to the takeover attempt. Strong arguments against the deal are spread through media to rally resistance.

Real-world example: The takeover battle between UniCredit and Commerzbank

A recent and instructive example is the takeover battle that Italian major bank UniCredit fought against German Commerzbank. All the dynamics described earlier were fully evident. Commerzbank relied on traditional defense strategies—its broad shareholder distribution proved a significant advantage, making it difficult for the attacker to gather a sufficient majority. The management also mobilized political and media support against the takeover attempt. The outcome shows that despite the strategic advantage of the buyer, a well-coordinated defense by the target company can be successful.

Why new crypto projects are safe from such battles

Compared to established publicly traded companies, young crypto projects are much less vulnerable to hostile takeovers. The reason lies in their structure: new coins and decentralized projects focus on growth through transparent communication, technological innovation, and investor trust. They lack a centralized ownership structure like traditional companies, which can be acquired through stock purchases. This removes a key prerequisite for a hostile takeover—the ability to gain control by buying shares.