§ 01
| Defense | Mechanism | Effectiveness |
|---|---|---|
| Poison pill | Existing shareholders can buy stock at a discount, massively diluting the raider | Very effective — makes hostile acquisition prohibitively expensive |
| Staggered board | Only 1/3 of directors elected per year | Strong — raider can’t gain control for 2+ years |
| White knight | Find a friendlier acquirer to bid higher | Common — starts a bidding war |
| Crown jewel defense | Sell the most valuable assets to make target less attractive | Extreme — courts may block as breach of fiduciary duty |
| Pac-Man defense | Target launches counter-bid for the acquirer | Rare and dramatic |
§ 02
Strong takeover defenses protect management but may not serve shareholders. A target trading at $80 that rejects a $100 hostile bid must justify why staying independent is worth more than the premium.
§ 03
Check a company’s proxy statement for anti-takeover provisions: staggered board, poison pill, supermajority voting requirements. More defenses = more management entrenchment.
§ 04
A raider offers $50/share (40% premium) for a stock at $36. The board rejects it and activates a poison pill. Is this good for shareholders?
§ 05
§ 06
A hostile bidder offers $60/share cash for company trading at $50. Board resists, adopts 'poison pill.' What's the board's goal?
Five questions · AI feedback
Sit with the ideas.
A hostile bidder owns 14.9% of a target and announces a tender offer at a 30% premium. The target has a poison pill that triggers at 15% and a staggered board. The bidder also launches a proxy contest to replace the board. How long will it take the bidder to gain control, assuming shareholders support the bidder?
Why: