Posted in Finance, Accounting and Economics Terms, Total Reads: 444
Definition: Anti-Takeover Measure
Anti-takeover measure is the precautionary strategy implemented on periodic or continuous basis in order to avoid being bought by another company. Various methods like staggered board, poison pills, pac-man strategy etc can be used as a part of the strategy.
If management of a company believes that there is a takeover bid likely to occur and the company does not want to be overtaken for various reasons, the company uses various strategies or creates deterrence to make the acquisition less attractive.
There are various strategies undertaken by companies such as
Staggered board: A portion of the board is re-elected each year rather than whole board so that it becomes difficult and delayed for the acquirer to control the board to take decisions in their favor.
Poison Pills: Poison pills are triggered as a result of specific events such as an acquisition of 20% of outstanding stock or a tender offer for 30% or more of target’s stock. After the triggering of poison pills, the existing shareholders of the company may get additional share at a lower price during a specified time period or preference shares are issued to the target company’s shareholders which can be converted into multiple shares of acquirer upon acquisition. This makes the target less attractive.
Pac-man defense: Whenever a company is take over through a hostile strategy, the target company can also attempt to take over the company itself. The popular video game PacMan is responsible for its attribution.