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How to defend against hostile takeovers in New York

by | Jun 17, 2021 | Mergers and Acquisitions

As a business becomes more successful, it becomes more susceptible to hostile competitors. You should learn about hostile takeover defense strategies to protect your company.

Repurchase your stocks

As simple as it sounds, a stock repurchase can effectively defend against an outsider attempting to take over your company. You decrease the number of shares available to the hostile company when you buy back your stocks. This strategy also increases how much the acquirer would have to pay in order to gain control. It’s still possible for a hostile takeover to occur when you do a stock repurchase, so stay aware and consider implementing additional defense strategies.

Implement a shareholder rights plan

The shareholder rights plan, also known as a “poison pill,” offers your stock at a lower price only to existing shareholders. This allows them to buy more stock at a reduced price, making it more difficult and expensive for the hostile company to acquire shares.

Re-elect based on the staggered board strategy

The staggered board strategy defends against hostile mergers and acquisitions by making it more difficult for outsiders to mess with your board re-elections. You would only re-elect a certain number of board members annually with this defense strategy. This means it would take a long time for the acquirer to vote out your entire board.

Remove assets for termination

You could deter hostile acquirers from taking over your company by substantially compensating your top management upon termination of their employment. Compensating them reduces valuable assets in the company. The corporate world calls this strategy a golden parachute.

Many companies have become creative in the ways they protect themselves against hostile takeovers. Your attorney may help you understand the different defense strategies to know which to use in a certain situation.