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LSDefine
Simple English definitions for legal terms
structural takeover defense
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A quick definition of structural takeover defense:
A structural takeover defense is a way for a company to protect itself from being taken over by another company. This defense is put in place by the company to make it difficult for another company to take control without having any financial or operational impact on the target company. This can include legal mechanisms or policies that discourage hostile takeover attempts. Another type of takeover defense is a transactional defense, which involves financial or operational transactions designed to make a takeover bid more difficult. Examples of this include issuing new shares of stock or acquiring expensive assets.
A more thorough explanation:
Structural takeover defense is a legal mechanism adopted by a corporation to prevent hostile takeover attempts without affecting the company's financial or operational status. It is also known as a "shark repellent" defense.
- Poison Pill: A company can issue new shares of stock to existing shareholders, making it more expensive for the acquiring company to purchase a controlling interest. This makes the takeover less attractive and more difficult to achieve.
- Porcupine Provision: A company can adopt a provision that allows shareholders to redeem their shares at a premium if a hostile takeover occurs. This makes the takeover more expensive for the acquiring company and less attractive to shareholders.
These examples illustrate how a company can use structural takeover defense to make it more difficult for another company to acquire a controlling interest. By making the takeover more expensive or less attractive, the target company can discourage hostile takeover attempts and maintain its independence.