Scorched Earth Policy

A defensive strategy where a target company engages in extreme actions to make itself less attractive to the acquirer, such as selling off key assets.

Bear Hug

An offer made by one company to buy the shares of another for a much higher price than estimated value, making it hard for the target's management to refuse.

Lobster Trap

A corporate defense strategy that prevents any one shareholder from converting convertible securities into voting shares, thus thwarting a takeover.

Flip-over Pill

A poison pill allowing shareholders, except the acquirer, to purchase additional shares at a discount if a hostile takeover occurs, diluting the acquirer's stake.

Flip-in Pill

A defense where existing shareholders, excluding the acquirer, can buy more shares at a discount if a single buyer acquires a significant stake, diluting the acquirer's power.

Dead Hand Provision

A clause in a poison pill that allows only the current directors to disable the poison pill, preventing future boards from aiding a takeover.

Jonestown Defense

An extreme tactic where the target company threatens to destroy itself, such as by liquidating, rather than succumb to a hostile takeover.

Staggered Board

A defense strategy where board members' terms are staggered so only a portion of the board can be replaced each year, complicating takeover attempts.

Supermajority Provision

A requirement that a large percentage of shareholders, typically over 67%, must approve any major changes, such as mergers or takeovers.

Poison Put

A bondholder defense allowing for immediate repayment of bonds if a hostile takeover occurs, making a takeover more expensive for the acquirer.

Golden Handcuffs

Incentives given to key employees to ensure they remain with a company, especially during uncertain periods like a potential takeover.

Greenmail

A situation where a company repurchases its stock at a premium from a potential acquirer, who has bought a significant stake, to prevent a takeover.

Dual-Class Stock

A structure where a company issues different classes of shares, with one class having more voting rights, used to retain control in the hands of founders or management.

Fair Price Amendment

A provision requiring a potential acquirer to pay all shareholders a fair price, as determined by independent auditors, to prevent low-ball offers.

Just Say No Defense

A strategy where the target company's board simply rejects a takeover offer without seeking alternatives, often leading to a legal battle.

Litigation Strategy

Using lawsuits or legal challenges to delay or deter a hostile takeover, creating uncertainties and potential expenses for the acquirer.

People Pill

A defense where key executives threaten to resign en masse in the event of a takeover, potentially devaluing the company in the eyes of the acquirer.

Safe Harbor Plan

A pre-emptive defense involving financial restructuring to make the company less attractive or accessible to potential hostile takeovers.

Sandbag

Delaying tactics used by a target company's management to buy time during a takeover attempt, allowing for the exploration of other options or defenses.

White Squire

An ally or friendly investor who buys a significant stake in a target company to prevent a hostile takeover, without seeking control themselves.