Friendly Takeover: is when the acquisition is negotiated between the owners or the managers, with the acquiring party involved.
Unfriendly Takeover: is when the acquiring party goes around the management straight to the shareholders with a tender offer. Or when the management purchases a controlling share of the company using outside capital.
Post Merger Tactics: usually consists of three various types. The acquiring company may choose to 1) integrate the acquired firm, 2) divest of all or part of the firm’s business units, or 3) allow the company to continue acting independently.
White Knight: When a company is threatened by an unwelcome acquirer one of its options is to find a white knight. The white knight is a friendly party which would potentially acquire the firm or a significant interest in the firm so to hinder the unwelcome acquirer.
Shark Repellent: Is a strategy for a public company to take in order to fend off unwanted takeovers. It is a slang term for a various number of different types of measures that can be taken by the company.
Poison Pill: is a measure taken by a target in order to avoid being acquired. Some of which can be:
- Macaroni Defense: A firm which issues a large amount of bonds and provisions them to be redeemed at an exorbitantly stipulated price.
- Golden Parachute: Either a contract or a paragraph within top executives contracts which makes them unrealistically expensive to dispose of. It could compose of additional stock options, large severance pay…and potentially additional economic benefits.
- Defense Merger: This is when a firm which is already in a sharks sights mergers with another firm in order to create anti-trust or other regulatory problems for a takeover transaction to happen.
- Super Majority Provision: This is when a a takeover ratification is increased to require achieving two-thirds majority, instead of just a simple majority of votes.
- Special Charter of Bylaws: special bylaws could be activated upon the encountered attempt of a hostile takeover.
- Scorched-Earth-Policy: either selling the most valuable assets, or taking upon an unattractive amount of debt.
