Shark Watcher

What Is a Shark Watcher?

The term shark watcher alludes to a professional or firm that specializes in the early detection of hostile takeovers. Shark watchers are employed by firms that are worried about the possibility of being targeted by larger corporations. They monitor parts of a firm's trading activity on the market that could demonstrate a potential takeover, for example, who is accumulating shares and the number of shares acquired.

How Shark Watchers Work

Large corporations frequently take a gander at more modest companies and startups as simple takeover targets. The target firm may have a product or service worth obtaining, the acquirer might need to tap into another market, its business operations might line up with the acquirer, or the target might be rivaling the larger company.

At the point when a company would rather not be assumed control over, the potential acquirer may choose to seek after a hostile takeover. This happens when the company behind the takeover attempts to buy enough shares of the target on the open market or by purchasing shares from existing shareholders. Acquirers may likewise try to assume command over the company and supplant its management team to support the takeover.

Companies might have experience issues with their share prices because of issues with management, finances, or its business. Potential targets must be careful to prevent themselves from being dominated. One method for doing so is by hiring what the financial industry calls a shark watcher. The term is similar to a large shark swimming around a waterway looking for more modest fish to gobble up.

A shark watcher is a professional or company that monitors trading patterns in their client's stock and endeavors to determine who is accumulating shares. That is on the grounds that companies frequently start hostile takeover endeavors by obtaining stock so they have some control over a huge part of voting rights or a majority of voting rights. The shark watcher's primary business is typically the solicitation of proxies for client corporations.

A shark watcher can an interested in conceivable likewise be employed by an outsider risk arbitrage opportunities that might emerge because of an endeavored takeover.

Special Considerations

Shark watchers are key players in mergers and acquisitions (M&A). Yet rather than work with them, shark watchers assist with preventing them from happening, especially when the target company wants to be dominated.

So what happens when companies think they are targets? These businesses have a couple of options accessible to them when they accept another company might wish to take them over. There are a number of lines of defense that a target can use to discourage hostile parties who might show an interest in the potential target firm. They range from poison pills to golden handshakes and golden parachutes.

The poison pill defense raises the cost associated with takeovers by making the company's shares unfavorable. A golden handshake, which is negotiated certainly before a takeover, gives large severance bundles to a company's key faculty. Golden parachutes, then again, furnish executives with a number of advantages and benefits in the event of a takeover before they are terminated.

In many regards, the target company makes the cost of a takeover extremely high or exacerbates the company off from either a financial or strategic standpoint. The goal is to lead the purported shark to accept that procuring it turns into a less alluring business move.

Illustration of a Shark Watcher

Here is a speculative guide to show how shark watchers work. Suppose Sesame Brokerage is a public corporation that has a ton of important assets. The company's stock price has as of late been depressed due to macro trends clearing the industry. The company's management, shareholders, and board of directors are completely worried about being a takeover target.

Sesame Brokerage enlists Bert and Ernie's Shark Watchers Inc. to monitor the trading activity of Sesame Brokerage's shares on the open market. The firm will follow companies that secure shares of Sesame Brokerage and alert Sesame's management team to any conceivable takeover threats if and when an acquisition is made or before.

As of now, Sesame Brokerage could be made aware by its shark watcher that Monster ABC has been buying up critical measures of its shares, perhaps seeking to gain a majority holding. Beast ABC is known for procuring depressed companies. Sesame Brokerage can then prepare itself to fight off the takeover by executing different defenses before the acquisition is endeavored.

Highlights

• Companies under threat might utilize quite a few strategies to discourage the likely acquirer from proceeding with its hostile takeover plan.
• A shark watcher specializes in the early detection of hostile takeovers.
• Shark watchers alert companies and their management teams of any unusual activity they might recognize while monitoring market activity.
• Shark watchers are recruited by firms that are worried about being targeted by larger corporations through hostile takeovers.
• Shark watchers monitor parts of a firm's trading activity on the market, for example, who is accumulating shares and the number of shares acquired.