Mergers, Acquisitions, and Corporate Restructurings, Fourth Edition

Chapter 5. Antitakeover Measures

Corporate takeovers reached new levels of hostility during the 1980s. This heightened bellicosity was accompanied by many innovations in the art of corporate takeovers. Although hostile takeover tactics advanced, the methods of corporate defense were initially slower to develop. As a result of the increased application of financial resources by threatened corporations, however, antitakeover defenses became quite elaborate and more difficult to penetrate. By the end of the 1980s, the art of antitakeover defenses became very sophisticated. Major investment banks organized teams of defense specialists who worked with managements of larger corporations to erect formidable defenses that might counter the increasingly aggressive raiders of the fourth merger wave. After installing the various defenses, teams of investment bankers, along with their law firm counterparts, stood ready to be dispatched in the heat of battle to advise the target’s management on the proper actions to take to thwart the bidder. By the 1990s, most large U.S. corporations had in place some form of antitakeover defense. The array of antitakeover defenses can be divided into two categories: preventative and active measures. Preventative measures are designed to reduce the likelihood of a financially successful hostile takeover, whereas active measures are employed after a hostile bid has been attempted.

This chapter describes the more frequently used antitakeover defenses. The impact ...