Image Credit: Bordensprestige (CC by SA-4.0)
A backflip takeover is a rarely used type of takeover in which the acquiring company becomes a subsidiary of the acquired company after deal completion. This is the opposite of what occurs in a typical takeover, in which the target company becomes a subsidiary of the acquirer.
Backflip takeovers usually occur when the acquiring company is a larger, established firm that has had its brand irrevocably tarnished by a negative event such as a mass product recall, publicized product deficiency or accounting fraud charges. Meanwhile, the target company is a rival in the same industry with an untarnished brand, but less resources at its disposal. In this case, the former company may wished to be subsumed by the latter so that it can conduct operations under a new name. It will conduct business under the new brand, but still retain some management control in the new corporate entity. Meanwhile, the surviving company will likely be able to expand faster than it could have on its own, and still have a large managerial presence.
Recent Comments