I’ve heard about hostile takeovers in the past, and never thought much about them. One party wants control of the other. Okay so I suppose that can be considered hostile, but to whom? Besides why would one firm want to take over another through the purchase of shares in the company to gain control? Well, perhaps the firm is undervalued due to poor management. In this case the firm hostilely taking over the other will gain control and then replace the managers. Ahhh… here is the golden nugget. The takeover is mainly hostile to the managers of the takeover candidate. Is this necessarily a bad thing for the shareholders? Well, I think it depends on the company taking over the poorly managed one. In many cases what is the point of putting time and capital into a take over unless it is for a profit? The only loser here seems to be the managers of the firm being taken over. Therefore, managers really ought to keep this in mind that their job security might not be a great as they thought. As a manager your job is to manage the company to create shareholder value, not fill your pocketbook. Hmmmm…. Enron sounds familiar and now the banks (there are too many to name at the moment).

So, what will most likely happen? I always say that I can’t predict the future, but there are bound to be various take-overs and mergers in the next year or so. We already saw it with Bear Stearns (BSC). Part of my conspiratorial thinking wants to jump to the potential conclusion that there is something fishy about that deal and the swift take-over with JP Morgan and the Fed.

More on the Fed later, but do you realize that the Fed is a semi-governmental institution. That the banks that make-up the fed are private. Makes me start to wonder… I’m about to go down the rabbit-hole and will save the Fed for another post.

Happy Friday Everyone! The markets are taking a nice nose-dive. Personally, I’m not surprised. Things aren’t rosy, but gloomy. Perhaps the last rally was the calm before the storm???