In a takeover, one company will buy another company and assume control of it. Publically listed companies will usually make a public takeover bid or offer for the target company, which must be accepted by the target company’s shareholders (its current owners) before it can be completed.
Takeovers and mergers are very similar, but whereas takeovers generally involve a larger company buying and taking control of a smaller company, a merger usually takes place between two similar-sized companies and the shareholders of the two companies end up with similar-sized shares of the merged entity in a mutual decision. Takeovers can be friendly, where the board of the target company accepts the approach and recommends the deal to its own shareholders, or hostile whereby the acquirer goes directly to the target’s shareholders against the wishes of its management and board.
Takeovers and mergers are generally categorised as Mergers and Acquisition, or M&A. The biggest ever takeover remains Vodafone’s acquisition of Germany’s Mannesmann for $202 billion in 1999.