Editor’s Note: In the immortal words of movieland’s fictitious corporate raider, Gordon Gekko: “Greed, for lack of a better word, is good.” That mantra may sound like a relic from the coke-dusted boardrooms of the 1980s, but it still holds up, especially if you’re a shareholder watching your sleepy little stock get shaken awake by an aggressive suitor.

Hostile takeovers constitute corporate warfare, but they often deliver windfalls to the very people Wall Street loves to forget: the retail investors. Below, I explain how you can profit when the sharks start circling.

The Upside of War

When two companies decide to tie the knot, it’s usually a civilized affair. Both boards agree, the lawyers high-five as they rake in fees, and the cheerful press releases flow. The companies are “please, excited, thrilled,” etc.

But sometimes, one side isn’t feeling the love. Corporate war breaks out. That’s when things get interesting, and potentially profitable for shareholders.

Enter the hostile takeover, where the would-be buyer crashes the party and tries to woo shareholders directly, often with bags of cash and promises of greener pastures.

Tender Offers: Money Talks

If the target company’s board isn’t interested in selling, the acquiring company can cut out the middlemen and go straight to shareholders with a tender offer. This is Wall Street’s equivalent of slipping a wad of cash under the table.

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Here’s how it works: the acquirer offers to buy shares at a premium above market price. If enough shareholders say yes, and that usually means a controlling stake, the suitor can push the deal through, board approval or not.

Even if the bid fails, the offer alone can drive up the stock price, putting money in shareholders’ pockets. That’s capitalism in raw form.

Proxy Fights: The Corporate Game of Thrones

If the tender offer doesn’t fly, there’s always the proxy fight, a bare-knuckled battle for the boardroom. The would-be acquirer nominates a new slate of directors who are, let’s say, more receptive to change. Shareholders then vote by proxy ballot.

If the activist slate wins, the new board can bless the merger, and current management gets sent to the glue factory.

Even if the hostile bidder fails to win, this battle often forces the company to improve operations or offer shareholder goodies, e.g. special dividends, buybacks, or promises of reform. All of which can be very good for your bottom line.

Poison Pills: Toxic Name, Tasty Outcome

Faced with an unwelcome suitor, companies sometimes reach for the corporate cyanide: the poison pill, or more politely, a “shareholder rights plan.” It works like this: if a buyer accumulates a large stake, say, 10% or more, other shareholders get to buy new shares at a deep discount, diluting the aggressor into submission.

Netflix (NSDQ: NFLX) famously used this tactic in 2012 to block Carl Icahn’s advances. And during recent market volatility, many firms quietly adopted poison pills to avoid being scooped up on the cheap.

Ironically, poison pills can actually sweeten the pot for shareholders. They often force acquirers to raise their offers, meaning higher premiums and a fatter payday for you. In the corporate jungle, a little venom can go a long way.

A Wake-Up Call for the C-Suite

Even when hostile takeovers don’t go through, they can light a fire under complacent management. Faced with shareholder unrest and takeover threats, execs might suddenly “discover” the need to cut costs, streamline operations, or (shocker) tie their own compensation to performance.

An aggressive activist investor can breathe new life into a moribund stock by shaking up the C-Suite, demanding operational improvements, and forcing a strategic reassessment that often includes asset sales, share buybacks, or even a full-blown sale of the company.

Armed with a substantial equity stake and a loud public platform, the activist exerts pressure that management can’t ignore, galvanizing change where stagnation once reigned.

By exposing inefficiencies and unlocking hidden value, the activist often rallies investor confidence, sending the stock price higher even before structural reforms take hold. In essence, they turn passive underperformance into a battleground, and sometimes, into a turnaround.

Hostile takeovers aren’t just about mergers; they’re about accountability. Whether the deal goes through or not, shareholders often walk away wealthier.

When corporate raiders come knocking, it’s not always a bad thing. In fact, if you own shares in the target company, it might be time to pop the champagne or at least check your portfolio. Because in the ruthless world of Wall Street, Gekko was right about one thing: greed can be very, very good.

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