Business Definition for: shark repellent
shark repellent
measure undertaken by a corporation to discourage unwanted
takeover
attempts. Also called porcupine provision. For example:
- fair price provision requiring a bidder to pay the same price to all shareholders. This raises the stakes and discourages
tender offers
designed to attract only those shareholders most eager to replace management.
-
golden parachute
contract with top executives that makes it prohibitively expensive to get rid of existing management.
- defensive merger, in which a
target company
combines with another organization that would create antitrust or other regulatory problems if the original, unwanted takeover proposal was consummated. See also
safe harbor
.
-
staggered board of directors
, a way to make it more difficult for a corporate
raider
to install a majority of directors sympathetic to his or her views.
- supermajority provision, which might increase from a simple majority to two-thirds or three-fourths the shareholder vote required to ratify a takeover by an outsider.
See also
scorched-earth policy
,
poison pill
shark repellent
Related Terms:
technique used by a company that has become the target of a takeover attempt to make itself unattractive to the acquirer. For example, it may agree to sell off the most attractive parts of its business, called the crown jewels, or it may schedule all debt to become due immediately after a merger.
strategic move by a takeover-target company to make its stock less attractive to an acquirer. For instance, a firm may issue a new series of preferred stock that gives shareholders the right to redeem it at a premium price after a takeover. Two variations: a flip-in poison pill allows all existing holders of target company shares except the acquirer to buy additional shares at a bargain price; a flip-over poison pill allows holders of common stock to buy (or holders of preferred stock to convert into) the acquirer's shares at a bargain price in the event of an unwelcome merger. Such measures raise the cost of an acquisition, and cause dilution, hopefully deterring a takeover bid. A third type of poison pill, known as a people pill, is the threat that in the event of a successful takeover, the entire management team will resign at once, leaving the company without experienced leadership.
strategic move by a takeover-target company to make its stock less attractive to an acquirer. For instance, a firm may issue a new series of preferred stock that gives shareholders the right to redeem it at a premium price after a takeover. Two variations: a flip-in poison pill allows all existing holders of target company shares except the acquirer to buy additional shares at a bargain price; a flip-over poison pill allows holders of common stock to buy (or holders of preferred stock to convert into) the acquirer's shares at a bargain price in the event of an unwelcome merger. Such measures raise the cost of an acquisition, and cause dilution, hopefully deterring a takeover bid. A third type of poison pill, known as a people pill, is the threat that in the event of a successful takeover, the entire management team will resign at once, leaving the company without experienced leadership.
disposal by the target of a corporate acquisition of its crown jewels for the purpose of thwarting a hostile takeover. Such a strategy often results in a permanent impairment of its earning power and value.
Referring Terms:
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
