Hostile takeover of a Private Company

Ok here we have a company and have identified some private companies. We are planning for an equity stake in these companies, however this is very tough as they are unwilling but instead prefer debt Finance.

Taking over a public company is easier since you can apply a number of strategies such as accumulate stakes privately until you get a majority stake. Does anyone know how we can be hostile on private companies?

 

I'm only a first year student in university and I don't know much, but I think you could try confronting an individual shareholder vs the corporation itself to sell you their shares. However, the shareholders may have a shotgun clause or something similar that would allow other current shareholders to buy the shares of the individual who is selling their shares.

 
Best Response

I don't think it makes much of a difference if its a minority or majority stake. If you don't care about voting rights, you can just buy preferred shares. I'm sure they would be more open to that idea if they are fine with debt financing.

Another idea would be to go the debt financing route but put a debt/equity swap clause in the agreement, then take control over a company that they rely on to conduct business and have them refuse service to the company. The company will be unable to make payments on the loan and you can have them convert the debt into equity. You also may be able to get away with just threatening to refuse service. This can be done in the same way with any other kind of major stakeholder.

You could also try to get the current shareholders to turn on each other (get angry with each other) and then ask to purchase their shares. Once you obtain any number of shares and your shareholder agreement includes a shotgun clause, you can force the other shareholders to sell theirs. Usually you name the price and they decide whether they will buy yours or sell theirs to you. They will have a short period of time to make a decision. You just need to offer a price that they cannot afford.

 

Someone said this:

1) There are 3-5 shareholders only and then you have to negotiate with 1-2 of them only and convince them to sell their shares so you have 51% and majority voting power if not specific voting regulations were implemented.

2) There more than 5 shareholders or even dozens and then you have to conceal your goal unless you can convince 10-20 people to sell their shares and go against BOD and management. MORE SHAREHOLDERS = LESS PROBABILITY OF NEGOTIATING A SALE OF 51% EQUITY and voting powers

So you set up around 10 useless apparently unrelated companies/funds and have around 10 fake CEOs without paying them a salary, one for each company. You set up a fund that owns every one of the 10 companies/funds above.

Then each of the 10 CEOs will get in contact with one of the companies' shareholders to buy around his shares of the company because they believe it'll thrive.

By doing that, the company shareholders won't see the bigger picture of the hostile takeover and think it's just a bunch of CEOs buying small equity portion in their private firm.

How easy is it to get into debt and convert to equity later?

 

Very smart.

How would you go about staggering offers, so that way it doesn't come to light that 10 separate stakeholders had 10 separate CEO's reach out at same time. Or is this more like an over time process, taking seat by seat instead of a massive sale?

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller. "Live fast, die hard. Leave a good looking body." - Navy SEAL
 

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