Strategies and Tactics of Australian Takeovers.

This research paper examines the strategic decisions and motives, the tactics for implementation and the evaluation of the takeover and merger. The paper considers two major types of takeover i.e. those motivated by speculative gains and those motivated by a need to grow. Reasons are suggested as to why an organization will opt for a takeover as opposed to other forms of investment. Selection of a target company, estimating the value of the target and financing the acquisition are then considered as are the legal and political implications of takeovers with particular reference to directors of both target and raider companies. Defence tactics are also examined as these play an important role in the success or failure of the takeover strategy. There is a large amount of literature in text and magazine form, both on the theory of takeovers and the examination of particular takeovers. This paper has been documented in a similar fashion i.e. has studied some of the theories and has then demonstrated these by way of case studies. The case studies cover some Australian acquisitions from 1980 to 1988 and a detailed study is made on the Broken Hill Proprietary Company Limited and Bell Resources Limited takeover battle. This case is examined in detail as it is one of the largest takeover attempts in Australia's history, demonstrates many of the theoretical and legal documentation on acquisitions, is controversial politically, industrially and legally, has been occurring since 1983 and is, to date, still being fought.The report concludes that associated with the high potential returns from takeovers and other market advantages there is a corresponding level of risk. The level of risk varies depending on the type of acquisition. In many instances companies are not fully aware of these risks and this may lead not only to a failed takeover attempt, but to a failed company. The October 20, 1987 share market crash highlighted clearly those companies more vulnerable to this risk and also the importance market forces play in the role of takeovers. The report also concludes that the legality of takeovers is not always understood by directors and many attempted takeovers will be thwarted as a result. Those that are successful, both in the acquisition attempt and in earning appropriate returns after the acquisition, are usually companies that rigorously study all facets of the takeover, are flexible and have contingency planning. Finally, it is concluded that the level of takeover activity in Australia will increase as the global market expands and Australia moves into this market.