The attack and defence strategies are of critical importance for the situation of a takeover-bid from the view of the target company or the investor (raider).
They can be crucial factor whether the acquisition is successful or not. Several strategies are discussed and are evidenced on the basis of practical examples. Of special importance is the development of the bid premia during the takeover process and the impact to the shareholders wealth. It can be observed that through decades and several takeover waves in the 20th century specific defence strategies pointed out as favourites in use for target managers.
This project reviews the motivations for hostile takeovers, structures the random literature in this field, discusses the effects and impacts of popular attacks and defences and showcases several high-profile takeover bids.
Table of Contents
1 Introduction
1.1 Scope and Classification of the topic
1.2 Background
1.3 Objectives
1.4 Structure
2 Literature Review
2.1 Motives for hostile takeover attcks and anti-takeover defences
2.2 Attack and Defence Strategies
2.2.1 Introduction
2.2.2 Attack Strategies
2.2.2.1 Introduction
2.2.2.2 Tender Offer (Saturday Night Special)
2.2.2.3 Proxy Fight
2.2.2.4 Dawn Raid
2.2.3 Defence Strategies
2.2.3.1 Introduction
2.2.3.2 Golden Parachutes
2.2.3.3 Silver Parachutes
2.2.3.4 Poison Pills
2.2.3.5 Staggered Board
2.2.3.6 People Pill
2.2.3.7 Capital Structure Changes
2.2.3.8 Crown Jewels
2.2.3.9 Greenmail
2.2.3.10 Supermajority
2.2.3.11 Macaroni Defence
2.2.3.12 White Knight
2.2.3.13 Pac-Man-Defence
3 Conclusion
3.1 Limitations and Scope for further Research
3.2 Conclusion
Objectives and Topics
The primary objective of this dissertation is to provide a clear, structured overview and analysis of the diverse theoretical attack and defense strategies utilized in hostile corporate takeovers. By reviewing existing literature and examining high-profile case studies, the research aims to clarify complex terminology and evaluate the effectiveness of these strategies on shareholder wealth and takeover outcomes.
- Theoretical motives behind hostile takeovers and defensive measures.
- Technical analysis of primary attack tactics (e.g., Tender Offers, Proxy Fights).
- Categorization and assessment of preventive vs. reactive defense strategies.
- Impact of defensive mechanisms on firm value, stock performance, and managerial job security.
- Evaluation of the effectiveness of defenses in actual corporate takeover bids.
Excerpt from the Book
2.2.3.4 Poison Pills
There are various forms of poison pills. In the literature the term ‘poison pill’ is sometimes used as a synonym for defence strategies. However, we try to provide a clear format of poison pill and its subtypes.
The poison pill can take many forms, but it basically refers to anything which makes the target firm itself less valuable and less attractive for the predator.
We could say that three main poison pill methods exist:
The first is the so called ‘Flip-In Poison Pill’, also known as ‘Shareholders Rights Plan’. (Danielson and Karpoff, 2006; Sokolyk, 2010) Hereby, the current shareholders (except the bidding raider) have the right to buy more stocks at a steep discount when triggering event occurs. Such an event occurs when the unwelcome raider reaches a certain percentage, usually 20% to 40%, of the total stocks. The flow of additional cheap shares into the total pool of outstanding shares makes the existing shares worth less. The stockholders are less powerful and they have less voting rights because each new share is a smaller percentage of the total. The aim of the flip-in poison pill is to dilute the stocks held by the raider and so make the bid more difficult and expensive.
Summary of Chapters
1 Introduction: This chapter defines the scope of hostile takeovers within the M&A landscape, provides background on market trends, and outlines the research objectives and structure.
2 Literature Review: This section reviews the motives behind hostile attacks and explores a broad spectrum of theoretical attack and defense strategies, providing case studies to demonstrate their practical application.
3 Conclusion: The concluding chapter summarizes the findings, addresses the limitations of the current literature, and suggests directions for future academic research regarding the negotiation process and stakeholder impacts.
Keywords
Hostile Takeover, Mergers and Acquisitions, M&A, Defence Strategies, Attack Strategies, Shareholders Wealth, Poison Pill, Tender Offer, Proxy Fight, Golden Parachute, Corporate Governance, Takeover Bid, Bid Premium, Market for Corporate Control, Strategic Management
Frequently Asked Questions
What is the core focus of this research?
The dissertation focuses on analyzing the various attack and defense strategies employed during hostile takeover bids, aiming to bring clarity to a field often characterized by inconsistent terminology.
What are the central themes of the work?
The main themes include the motives for hostile acquisitions, the technical breakdown of attack and defense tactics, and the empirical impact of these strategies on company value and shareholder wealth.
What is the primary objective of this dissertation?
The goal is to provide a structured handbook of theoretically possible strategies used in hostile takeovers, supported by real-world case studies to illustrate their practical efficacy.
Which scientific methodology is used?
The work utilizes a literature review methodology, synthesizing academic research from the last 15 years and analyzing documented hostile takeover cases from practice.
What topics are covered in the main section?
The main section provides a detailed, technical analysis of attack tactics like the Tender Offer and Proxy Fight, as well as a comprehensive categorization of defense strategies ranging from pre-bid measures like Poison Pills to reactive measures like White Knights.
Which keywords best describe this work?
Key terms include Hostile Takeover, Defence Strategies, Poison Pill, Shareholder Wealth, and Market for Corporate Control.
How does a 'Golden Parachute' specifically function as a defense?
A Golden Parachute is a long-term preventive defense where top management receives lucrative compensation packages if they are fired following a change in control, theoretically aligning management interests with shareholders while simultaneously increasing the costs for an acquirer.
What is the 'Pac-Man' defense strategy?
The Pac-Man defense is a counter-attack tactic where the target company attempts to acquire the raider by purchasing shares of the acquirer's stock, aiming to discourage the original takeover attempt.
Are defense strategies always beneficial for shareholders?
The literature presents conflicting evidence; while defenses can increase takeover premiums for shareholders, they also create uncertainty and can potentially depress stock prices in the long term due to information asymmetry and operational disruption.
- Quote paper
- MSc Panagiotis Papadopoulos (Author), 2011, Hostile Takeovers - The use of Attack and Defence Strategies, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/182632
