First of all, we must understand that “takeover” and “acquisition” are distinct terms. These are often used interchangeably to describe one company gaining control of another.
A firm takes over another by gaining controlling interest (typically over 51% of voting shares), either through mutual agreement or by bypassing management to deal directly with shareholders. As of 2026, the process is increasingly governed by structured scales of compliance and data-driven due diligence.
Common Methods of Takeover
- Friendly Takeover: The acquirer and the target company’s board mutually agree on the terms of the acquisition through cooperative negotiations.
- Hostile Takeover: The acquirer seeks control against the wishes of the target’s management, often using two primary mechanisms:
- Tender Offer: A public invitation to shareholders to sell their shares at a fixed premium over the market price.
- Proxy Fight: Attempting to persuade shareholders to use their proxy votes to replace the current board with one that will approve the takeover.
- Reverse Takeover: A private company acquires a public company to gain a listing status on a stock exchange without an Initial Public Offering (IPO).
- Backflip Takeover: The acquirer voluntarily becomes a subsidiary of the target company, often to retain the target’s well-established brand identity.
The Standard Process (2026)
- Strategic Planning & Screening: The acquirer defines its goals (e.g., market expansion or technology access) and shortlists suitable target candidates.
- Valuation & Preliminary Review: Using financial metrics like EBITDA and discounted cash flows (DCF), the acquirer determines a fair purchase price.
- Initial Contact & NDA: Parties often enter a Non-Disclosure Agreement (NDA) to share sensitive data.
- Due Diligence: A thorough investigation of the target’s financial, legal, IT, and cultural health to identify risks before finalizing the deal.
- Deal Structuring: Deciding on the payment method—cash, stock swap, or a blend—and whether to purchase assets or the entire entity’s shares.
- Regulatory Approval: Filing for necessary clearances. For example, in India, a new framework starting April 2026 allows banks to finance up to 70% of an acquisition’s value. Deals exceeding specific asset or turnover thresholds must notify the Competition Commission of India (CCI).
- Integration: The final stage where management teams, IT systems, and corporate cultures are aligned.
Financing Tactics
- Leveraged Buyout (LBO): Using a high amount of borrowed money (debt), with the target’s assets often serving as collateral.
- Cash or Stock Consideration: Paying shareholders directly in cash or issuing them shares in the new parent company.
- Earnouts: Paying a portion of the price only after the target reaches specific performance milestones post-acquisition.
