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socrateaser
socrateaser, Attorney
Category: Business Law
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Experience:  Retired (mostly)
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while acquisitions are often friendly, there are numerous occasions

Customer Question

while acquisitions are often friendly, there are numerous occasions when a party does not want to be acquired. Discuss possible defensive strategies that firms can implement to fend off a hostile takeover attempt.
Submitted: 3 years ago.
Category: Business Law
Expert:  socrateaser replied 3 years ago.
Golden Parachute. Where executives are entitled to extraordinary severance packages in the event of early termination of their employment contract, this can sometimes dissuade a purchaser from committing a large investment, knowing that a substantial portion will be leaving with the current management.

Supermajority. If the corporation articles require a 2/3rds or greater shareholder vote to approve major corporation decisions, then this can prevent some purchasers from committing sufficient resources to the purchase of the takeover target.

Staggering board of director terms. If replacing the board of directors is structured so that it may require several years to accomplish, a prospective buyer may back away, knowing that the buyer cannot gain complete control for an extended period of time.

White Knight. A takeover target can sometimes find another investor willing to pay more to maintain the current ownership, and thus create a bidding war in the market, so as to make the takeover price undesirable.

PacMan. The takeover target can try to acquire the business attempting to purchase the takeover target.

Divestiture. The takeover target can sell the business' most important and valuable assets to a private shell company with the same management, held in different form. This technique devalues the takeover target.

Finis.
Customer: replied 3 years ago.
This answer was not what I needed. It wasn't the same subject of my class. Thank you anyways.

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