Defensive Tactics

Target-firm managers frequently resist takeover attempts. Resistance usually starts with press releases and mailings to shareholders that present management's viewpoint. It can eventually lead to legal action and solicitation of competing bids. Managerial action to defeat a takeover attempt may make target-firm shareholders better off if it elicits a higher offer premium from the bidding firm or another firm.

Of course, management resistance may simply reflect pursuit of self-interest at the expense of shareholders. This is a controversial subject. At times, management resistance has greatly increased the amount ultimately received by their shareholders. At other times, management resistance appears to have defeated all takeover attempts to the detriment of their shareholders.

In this section, we describe various defensive tactics that have been used by target firms' management to resist unfriendly attempts. The law surrounding these defenses is not settled, and some of these maneuvers may ultimately be deemed illegal or otherwise unsuitable.

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