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CS Executive · Capital Market and Securities Laws · Acquisition of Shares and Takeovers - Concepts

Meera Textiles Ltd, a listed company, receives an approach from Sundaram Industries, which wants to acquire control. The Meera board studies the proposal, finds it favourable, and recommends to shareholders that they accept the open offer. How is this takeover best described?

It is a friendly takeover, because the target company's board agrees with the proposal and recommends that shareholders accept the offer. Cooperation between the acquirer and the target management is the defining feature, unlike a hostile takeover where the board resists.

  1. AFriendly takeoverCorrect
  2. BHostile takeover
  3. CBailout takeover
  4. DReverse takeover

Explanation

A friendly takeover is one where the target's management and board agree to the acquisition and support it. Here the board recommends acceptance, so it is friendly. A hostile takeover would involve resistance by the board, and a bailout involves a financially sick target.

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