Takeovers are pretty common in M&As. This is why in order to protect a company, there are different classes of antitakeover measures. We will discuss all of those today.
One of the most priorities in running a business is to protect your company from a takeover. This is because a lot of shareholders and competitors are always planning a takeover. They do so to increase their stock shares – this is especially true if a company is successful.
Takeovers must be prevented. Furthermore, you can do so with the assistance of antitakeover measures.
Main Classes of Antitakeover Measures
Poison Pills
The first class of a preventative antitakeover measure is called “Poison Pills.” It is one of the most common preventative measures against hostile takeovers.
Basically, poison pills are securities placed around the company. It makes a company look less valuable in front of hostile bidders. If the bidder or competitor thinks that a company is less valuable than it actually is, they will put their focus somewhere else.
It truly is a competent form of defense. There have been countless instances where poison pills were used in order to protect a firm from a hostile takeover.
In 1982, Martin Lipton, a well-known takeover lawyer, invented the strategy of Poison Pills. Lipton used the strategy to defend El Paso Electric in its battle against General American Oil.
Then, in 1983, Lipton used the same strategy for the Brown Foreman vs. Lenox takeover contest. Know that there are different specifications of poison pills; this is very vital.
In a prior discussion, we went through this briefly. These different categories of poison pills are effective when it comes to dealing with raiders who want to achieve controlling influence over a company. Additionally, poison pills give higher return rates for companies.
Corporate Charter Amendments
The next class of antitakeover measures are known as the corporate charter amendments. Now, most people often confuse this with the corporation bylaws. However, they are not the same.
In fact, there are a lot of differences between corporate charter amendments and corporation bylaws. The board directors often establish corporate bylaws. They give the important rules for each company.
Corporate charter amendment is a more fundamental document. This document states a company’s purpose. It also contains the different classifications of shares a company may have.
Sometimes, a corporate charter amendment is called the articles of incorporations. Usually, shareholders are required to change or revise the articles of incorporation.
Looking at all of these from a merger and acquisition standpoint, the corporate charter needs to have an action such as staggering the board of directors. Now, in order to implement this, the shareholders need to approve it first.
If the corporate charter doesn’t state anything of sort before a hostile bid, then there is an increased likelihood that the shareholders may shun it.
This is crucial: keep in mind that the differences in the corporate charter are part of common anti takeover measures. State laws will dictate the extent to which these may be implemented. Now, every state has different laws, so you and your lawyers must remember this.
Antitakeover Measure Goal
As the word suggests, the goal of an antitakeover measure is to prevent a hostile takeover. Or, to make it more difficult for any hostile bidder to get managerial control over a company.
Using the methods we discussed above will make it more difficult for a hostile acquirer to change anything about a company. They will find that the task requires more time, energy, effort and money. In the end, they will think twice before making a hostile move.
A portion of the more normal antitakeover corporate contract changes are as per the following: staggered terms of the top managerial staff, supermajority arrangements, fair value arrangements, double capitalizations
Can These Measures Help?
Yes, they definitely can. You have to keep exploring and studying these common antitakeover measures in order to see how you can use it for your own company. Most giant companies utilize both strategies. This provides a layered security around the firm.
The better and higher the security, the more difficult it is for hostile bidders. Think of your company as a valuable asset, because it really is. The more individuals perceive how significant your organization is, the more they will need to dominate.
These preventative measures should be in place when that happens. It allows you to have peace of mind that your firm is in good hands no matter how hard a competitor tries.
Learning about these is crucial for every firm. It permits you to have better control of your firm, and better assurance for your entire organization.
As a leader, you need to be able to take these matters, learn from them and utilize these strategies for the better. You can also use the data you have absorbed from here to take over different firms and competitors.
It is also crucial to have a team of corporate lawyers and attorneys handling your company. They will be beneficial in your pursuit to protect your firm.
This is why there are countless companies who have lawyers in retainers. Most firms face countless threats on a yearly basis. Having a sound, smart strategy and the right people by your side can help you create the best defense and offense.
These antitakeover measures are just some illustrations of what you can do to conserve your firm. There are incalculable ways you can do so. Explore our encyclopedia for more data on what you can do as a leader.
Mergers and Acquisitions Encyclopedia
Antitakeover defenses are popular in the corporate world; especially in M&As. This is why there are a lot of antitakeover defenses and tactics discussed on our website.
You can find a lot more information about these different tactics if you go through our mergers and acquisitions encyclopedia. You can find information about mergers, acquisitions, strategies, state laws, financing, trading, buyouts, diversification, market history and more.
© Image credits to Anni Roenkae