What are poison pills in business?

What are poison pills in business?

A poison pill is a defense tactic utilized by a target company to prevent or discourage hostile takeover attempts. Poison pills allow existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of a new, hostile party.

Which of the following is an example of a poison pill?

Examples of Poison Pills Any attempt to buy a large equity position in Netflix without board approval would result in flooding the market with new shares, making any stake attempt very expensive.

Is there a poison pill?

A shareholder rights plan, colloquially known as a “poison pill”, is a type of defensive tactic used by a corporation’s board of directors against a takeover. The plan can be issued by the board of directors as an “option” or a “warrant” attached to existing shares, and only be revoked at the discretion of the board.

What are poison pills quizlet?

Poison Pill. A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make its stock less attractive to the acquirer.

What is poison pill in private equity?

What is it? A poison pill is a defensive tactic used by companies, which makes it difficult for a hostile acquirer to buy out a majority stake in the company, given the acquirer control over its management and shareholding.

What is a poison pill price?

Flip-in Poison Pill Option Shareholders have “rights” attached to the stock they already own. This allows them to pay an exercise price to use their rights. When they pay that exercise price, they’re entitled to a value of common stock or participating preferred stock at market value on the transaction date.

What is a poison pill in investment banking?

The term poison pill refers to a defensive technique used by a target firm to avoid or deter an acquiring business from taking the risk of a hostile takeover. Prospective targets use this strategy to make the potential acquirer appear less appealing to them.

Which of the following is an example of a horizontal merger?

A merger between Coca-Cola and the Pepsi beverage division, for example, would be horizontal in nature. The goal of a horizontal merger is to create a new, larger organization with more market share.

What is a vertical merger example?

A vertical merger joins two companies that may not compete with each other, but exist in the same supply chain. An automobile company joining with a parts supplier would be an example of a vertical merger.

What is an example of a poison pill?

Examples of Poison Pills. #1 – Netflix Poison Pill Example. Carl Icahn, an institutional investor, caught Netflix off-guard in 2012 by acquiring 10% stake in the company. The latter responded by issuing a shareholder’s right plan as a “Poison Pill”, a move which irked Carl Icahn to no end.

What is a poison pill in corporate finance?

In the world of corporate finance, the “poison pill” term originated in the United States. These tactics were designed to have detrimental effects to any acquirer who, if by aggressive means, decided to take over the company employing the poison pill. The tactic was first employed by the firm Wachtell, Lipton, Rosen, and Kantz.

What are the non-financial methods of a poison pill?

Finally, one non-financial method of a poison pill is to stagger the election of the board of a company, causing the acquiring company to face a hostile board for a prolonged period of time.

What are poison pill tactics?

Poison pill tactics were designed to discourage a potential acquirer from pursuing a takeover. The tactic was first employed by the firm Wachtell, Lipton, Rosen, and Kantz. Martin Lipton invented the tactic as a defense during a takeover battle in the 1980s.