There are pre-offer and post-offer defenses for a hostile takeover. Post-offer defenses are more difficult to execute as there is more legal scrutiny on those.
Some common pre-offer defenses include:
- Poison pill defense – gives existing shareholders right to buy additional shares at discounted prices, diluting the share pool and increasing the takeover price.
- Poison put – allows bondholders to demand immediate repayment on debts if a hostile takeover occurs
- Restrictive takeover laws
- Staggered board
- Restricted voting rights
- Supermajority voting provisions for mergers
- Fair price amendment
- Golden parachutes – provisions that usually guarantee large payments if existing management loses their jobs in a takeover
Some common post-offer defenses include:
- Litigation
- Greenmail – an agreement when the takeover target agrees to repurchase its shares from the acquirer at an increased price, essentially paying of the acquirer
- Share repurchases
- Leveraged recapitalization
- Crown jewel defense – sell off prized assets to neutral or friendly third party to dissuade acquirer
- Pac-Man defense – when the target company puts in a bit on the acquirer company, threatening to become the acquirer
- White knight defense
- White squire defense