Classroom Companion: Business

14.1 · Definitions

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Acquisition or takeover can be divided into four categories depending upon 
how the acquisition takes place: friendly, hostile, reverse, or backflip.
5
Friendly takeover means that the takeover is agreed by the management and the 
stockholders of both companies. However, the takeover is initiated by one of 
the companies making it technically different from a merger. In practice, there 
is no difference between mergers and friendly acquisitions. The Facebook 
acquisition of WhatsApp is an example of a friendly takeover (Deutsch, 
2020
).
5
Hostile takeover implies that the management of the target company is unwill-
ing to accept the takeover, but for some reason, the takeover nevertheless takes 
place. Methods may include offering a price well over the market value of the 
company, persuading enough stockholders to vote for a new and friendly man-
agement, or buying stocks directly or via intermediaries to gain control of the 
company. See, for example, Oracle’s acquisition of PeopleSoft (Daines et al., 
2006
).
5
Reverse takeover is a term used for takeover of a public company by a private 
company so that the private company can go public bypassing the complex 
process of going public itself. One example from digital economy is the reverse 
takeover of the public US mobile operator Metro PLC by the privately owned 
T-Mobile USA (Deutsche Telecom) to form the new public company T-Mobile 
US, the third largest mobile operator in the USA (Garza, 
2013
).
5
Backflip takeover is an acquisition where the acquirer makes itself a subsidiary 
of the acquired company, usually because the brand name of the acquired com-
pany is better known. The Danish video game producer Interceptor Entertain-
ment acquired the American company 3D Realms in 2014; moved its 
headquarters to Aalborg, Denmark; and continued its business under the name 
3D Realms (Handrahan, 
2014
).