Role of the Corporate Board in Acquisitions

In a corporate acquisition, it is the board of the company being acquired that has the most power in the process. As representatives of the corporate shareholders and management, they have to evaluate the potential acquisition and take action. Once the potential buyer (company) makes an offer, the board of directions has a few options.

In the case of a typical acquisition:

1) The corporate board can accept the offer if it is considered favorable. This is done if the terms of the acquisition significantly benefit the corporation being acquired as well as its shareholders and managers. This is, of course, a best-case scenario, though it is relatively uncommon except in cases where the corporation being acquired actively pursued an acquiring corporation in the first place.

2) The corporate board can bargain for a better offer. This happens at least partially in most situations, as few acquisitions are dismissed or accepted outright. The amount of leverage available to the company being acquired depends on a variety of factors, including their relative value and amount of power over the situation.

Or, in the case of a hostile takeover attempt:

3) The corporate board can reject the offer and use strategies to disinterest the potential buyer. There are a number of ways that a company can make itself less appealing to another company that is attempting to acquire it. Some of these are legal and ethical while others are not

4) The corporate board can try to find a company that offers more favorable terms. In situations where the company is unlikely to avoid being acquired, this is often the best option available. This strategy can work if the company is of potential interest to various parties within or beyond their immediate scope of operation.

In any of these case, the board of directs is at the center of the decision-making process. What they decide as well as the actions they pursue can have powerful consequences for all parties involved, positive and negative. More information about corporate boards, mergers and acquisitions can be found on various reference sites, though it helps to have a basic knowledge of relevant terms and processes to help sort through often complex information.