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Three smart ways to stop an acquisition from happening

by | Sep 28, 2021 | Mergers and Acquisitions

For one reason or another, a business will take over another company. However, not all acquisitions are friendly. When one business tries to take over another one without the other company’s consent, it’s known as a hostile takeover. If another company is trying to take over your business in New York, you have several potential ways to stop this from happening.

Having another company step in

One common way to resist a hostile takeover is by using the white knight defense. This defense occurs when a new company steps in to buy your business. Instead of a hostile takeover, this situation can be mutually beneficial for your business and the new buyer.

Using the poison pill defense

While it’s a little controversial, certain countries still allow the poison pill defense to prevent a hostile takeover. To do this, a business that’s at risk of getting taken over would dilute its shares to make a takeover extremely expensive for the other company. If the costs are too high, the company that wants to take over your business might change its mind.

Buying shares back from investors

It’s also possible to prevent mergers and acquisitions by using the greenmail defense. Your company would need to buy back its shares to pull off this strategy, often from individual investors and at a significantly high cost. While it could be a costly move to make, the greenmail defense could be the only way to save your business from a hostile takeover.

In closing, there are several potential ways to protect your company from a hostile takeover. Before using any of the previously mentioned strategies, take time to understand the pros and cons of each tactic.