As per the Regulation 2(1) (b) of the Takeover Code, SEBI specifies the term Takeover as an “acquisition” as “directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target company”

Key elements of a takeover

It’s an attempt to take over the control of a company which is already registered.
The shares are purchased from the shareholders of a company to an extent of controlling the interest and thereby gaining control.

Types of takeovers as per law

Friendly takeover – Negotiation happens between the promoters of a company and the investors in a friendly manner to further some common objectives as per Section 395 of the Companies Act, 1956.
Bail-out takeover – Takeover of a financially sick company by a finically well-off company to bail them out from losses as per Sick Industrial Companies (Special Provisions) Act, 1985

Hostile takeover where the investors actively pursue the takeover without the knowledge of other company attempted through a public tender offer. as per SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997.

Corporate Raiders – Making an offer to shareholders after the board of directors have refused or by completely bypassing them.

Types of takeovers as per business context

Horizontal Takeover – Happens between companies from the same industry. The main purpose is increasing the market share or achieving economies of scale. Example Lipton India and Brooke Bond, Bank of Madura with ICICI Bank.

Vertical Takeover – Happens between companies operating at different stages of production within the same industry. Example is Tata Motors acquiring 80% stakes in Trilix Srl

Conglomerate takeover – Happens between companies operating in totally different industries. The main purpose of this kind of takeover is diversification. Example Reliance Industries (RIL) taking over Reliance Petroleum (RPL)

Benefits of a Takeover

• External Growth whereby firms can expand horizontally, vertically and in conglomerate direction.
• Diversification into alike markets or increase sales
• Vertical Integration by linking a series of sequentially related input assembly operations
• Reducing costs and redundancies, enhance economy of scale