What initial response is required from the Target?

There is no obligation for the Target Board to accept or reject the takeover bid until it releases its Target's Statement in 14 – 28 days' time. The Target Board does not have to make an immediate announcement of its response to the takeover bid – it can take its time. 

But shareholders and the market will expect some form of immediate response. This is usually in the form of a 'take no action' announcement.  

A 'take no action' announcement merely acknowledges receipt of the takeover bid and advises shareholders that they will have plenty of time to consider the offer, so they should take no action until they have received the Target's Statement.

Indeed, it is important for the Target to avoid giving any substantive response before the release of the Target's Statement. This is because the Target Board cannot provide 'financial advice' outside of the Target's Statement, and any substantive response (such as 'reject' the takeover bid) could be considered that.

How is the initial response made?

Even to release a simple 'take no action' announcement in the face of a hostile takeover bid is not easy –it typically requires: 

• the Target to hold a meeting of the Target Board;
• the Target Board to consider the takeover bid at a high level, including its price and other terms and conditions; and 
• the Target Board and management to draft and agree the form of the 'take no action' announcement. 

To do the above, the Target Board and management will likely want to take advice from legal and financial advisors.

Making the initial response quickly

The above means that, within several hours of receiving a hostile takeover bid, the Target will need to convene a meeting of its Board, with key members of management and its legal and financial advisers present.  

That can only happen if the initial response has already been planned. Everyone involved needs to have already understood their role and what is required of them in the first 24 hours after receiving a hostile takeover bid, and have already been prepared for it.

Key aspects of this planning and preparation include:

Board

• Regularly consider its view on the Target's value, so that they have a common view and can quickly assess the value offered under any hostile takeover bid;
• Keep up-to-date on takeover issues affecting the company by having regular briefings from financial and legal advisors;
• Be contactable on short notice and able to attend, in person or by phone, an urgent Board meeting to consider the initial response to any hostile scenario.

Management

• Be aware of their role in supporting the Target Board to guard against a hostile Bidder circumventing the Target Board and approaching management directly;
• Be able to quickly provide the Target Board with up-to-date information on the Target's value;
• Be contactable on short notice and able to attend, in person or by phone, the urgent Board meeting to consider the initial response to any hostile scenario.

General Counsel / Company Secretary

• Organise regular briefings from financial and legal advisors for the Target Board on takeover issues affecting the company; 
• Have financial and legal advisors engaged and briefed on a rolling basis to immediately respond to any hostile scenario. (There is no real time available to request pitches or to agree terms of engagement once the company is in play);
• Be able to quickly convene the initial meeting of the Target Board, with management and advisors present (have up-to-date contact details);
• Have a template agenda for the initial meeting of the Target Board prepared;
• Have a template 'take no action' announcement prepared.

Financial Advisors

• Maintain an up-to-date view on the Target's value;
• Stay informed on the takeovers landscape affecting the Target, including monitoring its register movements and any likely counter-bidders or 'white knights' ;
• Be contactable on short notice and able to attend, in person or by phone, the urgent Board meeting to consider the initial response to any hostile scenario.

Legal Advisors

• Stay informed on the takeovers landscape affecting the Target, including latest law and policy;
• Maintain an understanding of the key legal drivers affecting Target's business, such as exposure to key contracts or regulatory issues that may impact a control transaction;
• Be contactable on short notice and able to attend, in person or by phone, the urgent Board meeting to consider the initial response to any hostile scenario.

The next phase

After release of the 'take no action' statement, the Target will need to consider its substantive response to the takeover bid. This may require strategic actions before the release of the Target's Statement – such as engaging with key shareholders and other stakeholders, and applying to the Takeovers Panel to seek proper disclosure in the Bidder's Statement.