Defensive Tactics

Defensive tactics help companies resist takeover attempts and protect their independence.

It may involve negotiating more favorable terms during a potential acquisition or discouraging hostile bidders. 

Common defensive tactics to avoid mergers or acquisitions include the Poison Pill, Shark Repellent, Golden Parachute, and White Knight.

Through a Poison Pill, shareholders can purchase additional stock at a discount, diluting the acquirer’s stake and making the company harder to acquire. 

The Shark Repellent strategy involves changes in corporate bylaws, such as requiring a supermajority vote for mergers, which makes takeovers more difficult.

A Golden Parachute provides lucrative compensation packages for executives in the event of a takeover, which acts as a deterrent for potential acquirers.

A White Knight is a friendly acquirer who agrees to purchase the company on favorable terms, protecting it from a hostile bid.

These four tactics demonstrate how companies can protect their independence.

For example, in twenty-ten, Airgas adopted a poison pill strategy to block Air Products’ hostile takeover attempt. 

This strategy protected Airgas’s independence until Air Products eventually abandoned its bid.