Anti-Takeover Statute

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Definition: Anti-Takeover Statute

A takeover happens when one company (acquirer) purchases another (target) and runs both as a combined entity. Takeovers can be friendly or hostile.


A friendly takeover is usually a merger that happens between two companies with the complete consent of the target. On the other hand, a hostile takeover occurs when the acquiring company forcefully acquires the target company, despite the target not being willing to get acquired. Such a hostile takeover is possible when the acquiring company goes to the open market and purchases shares of the target company to an extent that will help it to gain majority stake (and thereby control) in the target’s board and management.


There are laws that prevent hostile takeovers from happening and they are broadly classified under the umbrella of “Anti Takeover Statute”. These laws are usually defined within the scope of a state and apply only to the companies incorporated in that state.



The purpose of an anti-takeover statute is to mainly protect local firms from getting acquired by big players or foreign companies. By preventing hostile takeovers, the law protects local jobs and promotes local investment in the business of the companies.



Usually anti-takeover laws have provisions that will make the process of takeover difficult. Some examples are that of fair price provision (all shareholders must receive the same price whether or not they accept the takeover offer) and business combination provision (limiting sales of target’s assets by acquiring company).



An example of a famous anti-takeover statute is that of Delaware Antitakeover Law, which applies to all the firms incorporated in the state of Delaware. It delays unwanted bidders, who buy more than 15% of target’s stock, from taking over the target company for a period of at least 3 years subject to certain clauses.



Event though the law is intended to protect the interests of the local firms, it has been criticized on the grounds that it curbs even profitable/positive synergistic merger opportunities at times.



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