What is meant by poison pill in antitakeover amendments?
Poison pill, a subclass of corporate anti-takeover “shark repellent” to make the corporate target unappealing to an attacker. Shareholder rights plan, also called a poison pill, a subclass of anti-takeover provisions that dilutes the attacker’s power.
What is the poison pill in law?
Definition. A corporation’s defensive strategy against a hostile takeover bid in which current shareholders other than the tender-offer bidder or prospective bidder, upon a triggering event, have the right to purchase additional corporate stocks at a deeply discounted price.
How many mergers and acquisitions have happened with the poison pill?
It was reported in 2001 that since 1997, for every company with a poison pill which successfully resisted a hostile takeover, there were 20 companies with poison pills that accepted takeover offers.
What is poison pill in private equity?
What is a Poison Pill? The term poison pill refers to a defensive technique used by a target firm to avoid or deter an acquiring business from taking the risk of a hostile takeover.
How does a flip over poison pill work?
Flip-Over Poison Pill is a defensive strategy that enables shareholders to purchase shares in an acquiring company at a highly discounted price. Shareholders have rights attached to their shares, whereby all shareholders accept the acquiring firm can pay to exercise their rights.
What is green mailing?
What Is Greenmail? Greenmail is the practice of buying enough shares in a company to threaten a hostile takeover so that the target company will instead repurchase its shares at a premium. Regarding mergers and acquisitions, the company makes a greenmail payment as a defensive measure to stop the takeover bid.
Why do public companies adopt poison pill plans?
Companies typically adopt a poison pill when they are concerned about their vulnerability to a hostile takeover attempt or, in certain cases, have significant net operating losses (NOLs).
Is a poison pill good for shareholders?
A poison pill is a defense tactic utilized by a target company to prevent or discourage hostile takeover attempts. Poison pills allow existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of a new, hostile party.
What is a white knight takeover?
Key Takeaways A white knight is a hostile takeover defense whereby a friendly company purchases the target company instead of the unfriendly bidder. While the target company still loses its independence, the white knight investor is nonetheless more favorable to shareholders and management.
What is a white squire?
A white squire is an investor or company that takes a stake in a company to prevent a hostile takeover. A white squire only buys a partial stake, unlike a white knight that purchases the entire company. White squires don’t take controlling interests, rather, it’s just large enough to block the binding company.
Why is paying greenmail considered unethical?
Greenmail is often seen as a predatory practice, bordering on extortion. In this view, the greenmailer who buys up shares does not intend to participate in the company’s operations as a shareholder. Instead, the greenmailer buys the shares intending only to threaten management with a hostile takeover or other actions.
Are Hostile takeovers legal?
Hostile takeovers are perfectly legal. They are described as such because the board of directors, or those in control of the company, oppose being bought out and have typically rejected a more formal offer.
What do you mean by Flip in poison pill?
What is ‘Flip-In Poison Pill’. Flip-in poison pill is a type of strategy in which existing shareholders, but not acquiring shareholders, are allowed to purchase shares in the target company at a discount.
How is a poison pill used in a takeover?
As the name “poison pill” indicates, this tactic is analogous to something that is difficult to swallow or accept. A company targeted for such a takeover uses the poison pill strategy to make its shares unfavorable to the acquiring firm or individual.
Can a poison pill be revoked by the board?
Shareholder rights plans are typically issued by the board of directors in the form of a warrant or as an option attached to existing shares. These plans, or poison pills, can only be revoked by the board.
Is the poison pill strategy an effective defense?
Poison pill strategies can be extremely effective defenses for a company facing a takeover.