Certified Financial Management Specialist Practice Exam

Hostile acquisitions typically involve what type of approach?

1. Agreement from the target company's board.

2. Public negotiation over valuation.

3. Undertaking the acquisition without management's consent.

4. Joint partnership agreements prior to acquisition.

The correct answer is: Undertaking the acquisition without management's consent.

In the context of hostile acquisitions, the approach typically involves undertaking the acquisition without the consent of the target company's management. This is a key characteristic that distinguishes hostile takeovers from friendly mergers or acquisitions, where both parties agree upon the terms. In a hostile acquisition, the acquiring company may go directly to the shareholders or utilize tactics such as a tender offer, where shares are bought directly from shareholders at a premium, thereby circumventing the board's opposition. The essence of a hostile takeover lies in the lack of agreement or cooperation from the target's management team, who may not want to relinquish control or believe the acquisition does not serve the interests of their company or its shareholders. This approach poses unique challenges and risks, including potential backlash from current management and ongoing employees.