Question
Explain and give an example scenarios of the following: 1. POISON PILL - A poison pill is a defense tactic utilized by a target company
Explain and give an example scenarios of the following:
1. POISON PILL - 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.
2. GREENMAIL - Greenmail or greenmailing is the action of purchasing enough shares in a firm to challenge a firm's leadership with the threat of a hostile takeover to force the target company to buy the purchased shares back at a premium in order to prevent the potential takeover.
3. WHITE KNIGHT - A white squire and a white knight are similar in that both are involved in preventing a hostile takeover. However, the differentiating point is that a white knight purchases a majority interest while a white squire purchases only a partial interest in the target company.
4. PAC-MAN DEFENSE - The Pac-Man defense is a defensive business strategy used to stave off a hostile takeover, in which a company that is threatened with a hostile takeover "turns the table" by attempting to acquire its would-be buyer.
5. SELLING THE CROWN JEWELS OR SCOURCHED EARTH - The sale of valuable assets to others to make the firm less attractive to the "would be acquirer". The negative aspect is that the firm, if it survives, is left without some important assets.
6. SHARK REPELLANT - An acquisition of substantial amounts of outstanding common stock for the treasury or for retirement, or the incurring of substantial amounts of outstanding common stock.
7. LEVERAGE BUYOUTS - A leverage buyouts(LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.
8. THE MUDSLINGING DEFENSE - When the acquiring company offers stock instead of cash the prospective acquiring (acquirer) company's management may try to convince the stockholders that the stock would be a bad investment.
9. THE DEFENSIVE ACQUISITION TACTIC - When a major reason for an attempted takeover is the prospective acquiring (acquirer) company's favorable cash position, the prospective acquiring (acquirer) company may try to rid itself of this excess by attempting to takeover of its own.
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