Foreign hostile takeovers

Abstract

The main purpose of this thesis is to examine how the risk of a hostile takeover attempt on Ericsson is affected by the Swedish business environment. During the last century, a trend of centralization of businesses has emerged within many global markets. This trend has also affected Sweden; the country has experienced most M&A activity of all members of the European Union since the 1990’s. Still, there is only a small and decreasing number of hostile takeovers on the Swedish stock market. The authors perceive Ericsson to be a potential hostile takeover target, because of its significant reduced market value combined with the increased competition in telecom market. A case study of Ericsson is conducted and as a part of the thesis, it is including a company valuation. The work rests on the hypothesis that a potential takeover of Ericsson would be hostile and conducted by a foreign acquirer. Ericsson was selected as the case study object since it reflects some important characteristics of the Swedish stock market that the authors wish to illustrate. The empiric study is based on six profound interviews with professionals, specialized in different areas relevant to this thesis. The case study is delimited, only to examine companies with connections to the telecom market and especially Ericsson. The thesis only examines aspects of the Swedish stock market that are indicated by the respondents to affect a hostile takeover. The hostility in a takeover situation is decided by the response of the management of the target firm. There are mainly three issues resulting in the modest and declining amount of hostile takeovers in Sweden. In many large Swedish firms, the ownership is constructed mainly by a few head owner who control a vast majority of the voting power. Another issue making hostile takeovers difficult is the Swedish system of dual share classes with different voting values. The decreasing rate of hostile takeovers is due to the fact that hostile responses to takeover offers have become political incorrect because of the share holder value mindset. The authors believe that Ericsson is an attractive takeover target but it is protected by the special properties of the Swedish stock market. However, no company is completely safe from a hostile takeover.