Clandestine Takeover

Think about doing something in a clandestine way: having a secret affair might come to mind, or two politicians from opposing political parties meeting to reach a compromise without anyone else knowing about it. A clandestine takeover refers to a group or individual trying to gain control over a company without the knowledge of upper management or the Board of Directors.

If the target is a public company, they might buy stock on the secondary market without anyone knowing, until they have purchased enough where they have to disclose it as required by regulators. If they were on the up and up they would meet with the Board and make a good offer that shareholders would have the opportunity to approve or disapprove.

A clandestine takeover is more like a hostile bid. Let’s say Carlos Icanbuyit manages a hedge fund and has his eyes on buying We Cure Anything Pharmaceuticals. Carl’s hedge fund teams up with another pharmaceutical company to secretly buy up stock in We Cure Anything and make a takeover bid. We Cure and its large shareholders are not at all happy about this clandestine takeover attempt and file a lawsuit claiming the acquirers used insider trading. Carl and the pharmaceutical company’s takeover attempt fails and they lose the lawsuit as well, so this little clandestine idea of theirs ended up costing them millions.