Defence tactics against hostile takeovers

Poison Pill: A poison pill is a strategy where a company introduces provisions that make the takeover less appealing or more costly for the acquiring company. This can be done by issuing new shares to existing shareholders at a discounted price, making the acquisition more expensive and diluting the acquirer’s ownership stake.
Shareholder Rights Plan: A shareholder rights plan, also known as a “flip-in” or “poison pill,” grants existing shareholders the right to purchase additional shares at a discounted price if a hostile takeover occurs. This dilutes the ownership of the acquiring company and makes the takeover more difficult.
Golden Parachutes: Golden parachutes are contractual agreements with key executives that provide significant financial benefits in the event of a change in control or acquisition. By offering lucrative compensation packages, companies aim to discourage executives from supporting a hostile takeover.
Staggered Board of Directors: A staggered board structure involves electing directors for different terms, with only a portion of the board up for election each year. This makes it challenging for a hostile acquirer to gain control of the board quickly and reduces their influence over the company’s decisions.
White Knight: A white knight is a friendly third-party company that is sought out by the target company as an alternative to the hostile acquirer. The target company may negotiate a merger or acquisition deal with the white knight to fend off the hostile takeover and provide a more favorable outcome for shareholders.
Litigation and Regulatory Hurdles: The target company may initiate legal actions or regulatory challenges to delay or block the hostile takeover. This can involve antitrust concerns, legal disputes, or seeking regulatory approval, which can create obstacles for the acquiring company and prolong the acquisition process.
Pac-Man Defense: In a Pac-Man defense, the target company makes a counteroffer to acquire the acquiring company. This unexpected reversal can make the acquiring company reconsider its hostile takeover attempt and shift the balance of power.
Greenmail: Greenmail is a strategy where the target company repurchases its own shares from the hostile acquirer at a premium, effectively buying out the acquirer’s interest and ending the threat of the takeover.