What is a Friendly Takeover?

A friendly takeover is an acquisition in which the target company’s board of directors and management team favors the transaction. They usually favor it because the board expects that shareholders will be paid a favorable price (usually well above the current market price), and management expects to be retained to run the business. When the board recommends that shareholders vote in favor of the acquisition, it is more likely that the shareholders will do so. However, the Department of Justice may still nix a proposed transaction on anti-trust grounds, usually because it limits competition within an industry.

The reverse of a friendly takeover is a hostile takeover.