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.
What is the poison pill in private equity?
What is it? A poison pill is a defensive tactic used by companies , which makes it difficult for a hostile acquirer to buy out a majority stake in the company, given the acquirer control over its management and shareholding.
Is poison pill legal?
Some courts have found poison pills to be per se illegal . ... Generally, when courts find that management has refused to eliminate the pill simply for the purpose of driving up the price paid to shareholders (as a negotiating tactic), courts support the use of pills.
What is a poison pill law?
Definition. A corporation’s defensive strategy against a hostile takeover bid in which current shareholders other than the tender-offer bidder or prospective bidder, upon a triggering event, have the right to purchase additional corporate stocks at a deeply discounted price.
Are there poison pills?
As of April 12, 2020, only 2% of companies in the S&P 500 had poison pills in place . Poison pills can be effective at preventing hostile takeovers but may be harmful to investors, as they dilute their shares and prevent acquisitions that could actually help investors.
Is greenmail legal?
Greenmail is a corporate business tactic used by those that are financially savvy. Many countertactics have been applied to defend against and to financially engineer the reception of a greenmail. There is a legal requirement in some jurisdictions for companies to impose limits for launching formal bids .
Who invented the poison pill?
The architect of the anti-takeover defense, Martin Lipton , explained to the Deal why he dreamed up the poison pill in the first place. Starting in the 1970s, men like T. Boone Pickens and Carl Icahn were sending tremors through corporate boards.
Are Poison Pills good or bad for stockholders?
Poison pills can be good for the stockholders of the target firm if they allow the target company to force the acquiring firm to make higher offers for the acquisition.
What is a poison pill in politics?
In legislative debate, a wrecking amendment (also called a poison pill amendment or killer amendment) is an amendment made by a legislator who disagrees with the principles of a bill and who seeks to make it useless (by moving amendments to either make the bill malformed and nonsensical, or to severely change its ...
What are poison pills and white knight?
In Poison Pill strategy, the target company aims at making its own stock less attractive to the acquirer. ... White Knight is a company (the good guy) that gallops in to make a friendly takeover offer to a target company that is facing a hostile takeover from another party (a black knight).
Why do public companies adopt poison pill plans?
A poison pill is a defense tactic companies use to deter or prevent hostile takeovers . These “shareholders rights plans” often threaten to dilute the price of stock enough to give the target company time to find alternative bids. ... The poison pill brings down the value of the shares the corporate raider is trying to buy.
How does a flip over poison pill work?
The flip-over poison pill allows the shareholders of the target company to buy the shares of the acquiring company at a discount after the takeover bid has been successful . With the purchase, the shares held by the existing shareholders of the acquiring company become diluted.
What is white knight strategy?
A white knight is a hostile takeover defense whereby a friendly company purchases the target company instead of the unfriendly bidder . ... A white knight is just one of several strategies that a company can employ to try to avert a hostile takeover.
What is a poison pill in software?
Poison Pill is a rather melodramatic name for simply placing a certain, known, data item on the queue and when the consumer reads this item it closes down . Obviously, the poison pill has to be the last item placed on the queue or else the consumer will shut down prematurely.
What are poison pills quizlet?
Poison Pill. A strategy used by corporations to discourage hostile takeovers . With a poison pill, the target company attempts to make its stock less attractive to the acquirer.
What is poison put?
A poison put is a takeover defense strategy in which the target company issues a bond that investors can redeem before its maturity date . A poison put is a type of poison pill provision designed to increase the cost a company will incur in order to acquire a target company.
