What is a primary risk associated with hostile takeovers for the target company?

In a hostile takeover, a company is acquired against the wishes of its management and board of directors. One significant risk associated with this process for the target company is the loss of independence for management. When a hostile takeover occurs, the new owners may implement changes that can alter the existing management structure, including replacing key executives or altering company policies in a way that limits the autonomy of the current management team.

Management may find themselves no longer able to make independent decisions, as the new owners will impose their strategies and operational structures. This shift can lead to significant cultural changes within the organization, creating tension, resistance among existing managers, and potentially disrupting the company's operations. The loss of independence can also impact strategic direction, as management may be forced to align with the new owners' vision, which may not align with their original goals.

While other options may pertain to risks associated with hostile takeovers, such as potential impacts on employee motivation or asset values, the critical focus on management’s autonomy underscores how a change in ownership structure can directly influence the functionality and freedom of existing leaders in the organization.