Takeover defence refers to the measures taken by a company to safeguard itself against an unwanted acquisition by another company. There are two categories of takeover defence: structural and transactional. Structural defence involves legal strategies that enable a company to prevent a takeover without altering its fundamental structure. On the other hand, transactional defence involves actions taken by a company to increase the difficulty of a potential takeover, such as raising share prices or acquiring valuable assets.
Takeover defence refers to the actions taken by a company to thwart hostile takeover attempts. These actions can involve legal measures or financial/operational transactions that create obstacles for potential bidders seeking to acquire the company. By implementing such measures, a company can effectively deter future takeover bids without negatively impacting its financial or operational standing. For instance, a company may choose to include a provision in its bylaws mandating a supermajority vote for any acquisition or merger. Additionally, financial or operational transactions can be employed to complicate the process of a potential bidder acquiring the company. Examples of such transactions include issuing new shares of stock to dilute the value of existing shares, thereby increasing the cost for a bidder to obtain a controlling stake. Another tactic involves acquiring costly assets that enhance the company’s value and make it less appealing for a bidder to pursue. Furthermore, a poison-pill defence can be adopted, which entails issuing new shares of stock to existing shareholders at a discounted price in the event of a hostile takeover attempt. This strategy raises the cost for the bidder to acquire a controlling stake. These examples demonstrate how a company can utilise financial and legal strategies to safeguard its interests and deter hostile takeover attempts.
A takeover defence is a strategy used by a company to prevent or deter a hostile takeover attempt by another company or investor.
Common takeover defence mechanisms include poison pills, golden parachutes, staggered boards, and dual-class share structures.
Yes, takeover defences are legal, but they must be implemented in compliance with applicable laws and regulations.
Yes, a company can use multiple takeover defence mechanisms at once, but they must be implemented in a manner that is consistent with applicable laws and regulations.
Yes, shareholders can challenge a company’s use of takeover defences if they believe that the defences are not in the best interests of the company or its shareholders.
Yes, a company’s board of directors can adopt takeover defences without shareholder approval, but they must act in accordance with their fiduciary duties to the company and its shareholders.
Yes, a company’s shareholders can vote to remove takeover defences if they believe that doing so is in the best interests of the company and its shareholders.
Yes, a company’s management team can be held liable for implementing ineffective takeover defences if they fail to act in the best interests of the company and its shareholders.
Yes, a company’s shareholders can sue if a takeover defence results in a lower sale price for the company, but they must demonstrate that the defence was not in the best interests of the company and its shareholders.
Yes, a company’s board of directors can reject a takeover offer even if it is in the best interests of the shareholders, but they must act in accordance with their fiduciary duties to the company and its shareholders.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 27th April 2024.
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