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Simple English definitions for legal terms
takeover defense
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A quick definition of takeover defense:
Takeover defense is a way for a company to protect itself from being taken over by another company that it doesn't want to be taken over by. There are two types of takeover defense: structural and transactional. Structural defense is a legal way for a company to prevent a takeover without changing anything about the company. Transactional defense is when a company does something to make it harder for another company to take it over, like raising its share price or buying expensive assets.
A more thorough explanation:
Takeover defense refers to measures taken by a company to prevent hostile takeover attempts. This can be done through legal mechanisms or financial/operational transactions that make it more difficult for a potential bidder to acquire the company.
This is a legal mechanism that a company can adopt to prevent future takeover bids without affecting its financial or operational status. For example, a company may adopt a provision in its bylaws that requires a supermajority vote for any acquisition or merger.
This involves financial or operational transactions that make it more difficult for a potential bidder to acquire the company. Examples include:
- Issuing new shares of stock to dilute the value of existing shares and make it more expensive for a bidder to acquire a controlling stake.
- Acquiring expensive assets that increase the company's value and make it less attractive for a bidder to acquire.
- Adopting a poison-pill defense, which involves issuing new shares of stock to existing shareholders at a discounted price if a hostile takeover attempt is made. This makes it more expensive for the bidder to acquire a controlling stake.
These examples illustrate how a company can use financial and legal strategies to prevent hostile takeover attempts and protect its interests.