They also put the power back in the hands of the company board and existing shareholders as well as put large competitors at bay who may find a Tender Offer or hostile takeover an appealing route if a smaller public company has a bad quarter and sees significant decreases in the value of its stock. Shareholder rights plans have proven very effective at discouraging hostile and monopolistic takeovers of public companies. Around that time, the company announced a shareholder rights plan that allowed existing shareholders to acquire two shares for the price of one in the event that more than 50% of assets were planned to be sold in a merger or other sale transfer. Rights plans are often triggered or can go into effect once a single individual or entity acquires a threshold percentage of the shares.Ī great example of the “poison pill” defense occurred in 2012 when Carl C. This has the immediate effect of diluting the interest of any new shareholders intent at nefarious ends. Established as a mechanism in 1982, the shareholder rights plan is often more pleasantly referred to as the “poison pill.” In a “poison pill” defense, existing company shareholders have the right to purchase additional shares in the company at some discount. Shareholder Rights Plan or “Poison Pill”Ī typically successful defensive strategy in preventing a hostile takeover is something referred to as a shareholder rights plan. In this blog, we focus on the ways to defend against them. We will publish a blog shortly on how to initiate a hostile takeover if you are that way inclined. The definition of a hostile takeover is when one business attempts to take control over a public company against the consent of existing management or the company’s board of directors. However, corporate takeovers can sometimes become hostile.

Friendly in business means that the majority of the company’s stakeholders support the acquisition. Most corporate takeovers are friendly in nature. Defences are common, but you will need to seek out sell-side M&A expert that focuses specifically on these techniques. A hostile takeover adds additional complexities, but pre-emptive measures can be put in place to protect management. A hostile takeover is when someone forces you to sell or at least tries to. However, sometimes in the world of business, M&A activity is not always your choice. This M&A blog is very much focused on the when, how, what, why and who of M&A. Knowing the options can help public firms plan ahead. When outsiders attempt to induce a takeover via Tender Offer (TO) of a public company, there are a number of protections available to avoid the foreseen “hostility.” Unfortunately, some of the takeover defenses require contracts and statues implemented long before a unsolicited acquirer starts buying-up shares of the company’s stock on the public market.

What is a hostile takeover