A friendly takeover is the when the management and board of directors of the target company agree to be acquired by an acquiring company. Although the deal is typically subject to approval by additional parties, it is the decision of the management and the board that decide whether the deal is friendly or hostile. Subsequent agreement by both the target company’s shareholders and regulatory agencies such the U.S. Department of Justice (DOJ) will decide if the deal proceeds.
Most takeovers are friendly, but hostile takeovers and activist campaigns have become more popular lately with the risk of activist hedge funds. A hostile bid is the opposite of a friendly takeover (see our article on Hostile Takeovers for deeper analysis). Many takeovers that are initially considered hostile may ultimately turn friendly once the offer terms are improved and a company’s board recommend the deal to its shareholders.
Example of a Friendly Takeover
On November 1, 2019, Google (GOOG, GOOGL) and Fitbit (FIT) announced a friendly takeover where Google will pay $7.35 for each Fitbit share. The original 8-K filing made to the SEC does not mention the word “friendly” but it is clear from the language in the document there are no hostilities.
“More than 12 years ago, we set an audacious company vision – to make everyone in the world healthier. Today, I’m incredibly proud of what we’ve achieved towards reaching that goal. We have built a trusted brand that supports more than 28 million active users around the globe who rely on our products to live a healthier, more active life,” said James Park, co-founder and CEO of Fitbit. “Google is an ideal partner to advance our mission. With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone. I could not be more excited for what lies ahead.”
The subsequent shareholder vote approved the deal although the regulatory investigation continues (at time of publication). These however do not change the status of the bid as being “friendly”.
