What is the poison pill in private equity?

The term poison pill refers to a defensive technique used by a target firm to avoid or deter an acquiring business from taking the risk of a hostile takeover. Prospective targets use this strategy to make the potential acquirer appear less appealing to them.

What are poison pills quizlet?

Poison Pill. A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make its stock less attractive to the acquirer.

What effect do poison pills have on shareholder value?

Poison pills change the bargaining position as they increase the gain to the target firm and raise the costs to the bidder. Consequently, poison pills are related to higher takeover premiums for selling shareholders, in case of a successful takeover as well as the event without transaction (Comment & Schwert, 1995).

What is the name of poison pill?

A suicide pill (also known as the cyanide pill, kill-pill, lethal pill, death-pill, or L-pill) is a pill, capsule, ampoule, or tablet containing a fatally poisonous substance that one ingests deliberately in order to quickly achieve death through suicide.

Is poison pill legal?

However, the Delaware Supreme Court upheld poison pills as a valid instrument of takeover defense in its 1985 decision in Moran v. Household International, Inc. However, many jurisdictions other than the U.S. have held the poison pill strategy as illegal, or place restraints on their use.

What does redeeming a poison pill mean?

Once the buyer is at the negotiating table, he must ask that management sponsor a resolution whereby the pill is “redeemed” by shareholders and removed from each share. If the board agrees and the pill/rights plan is rescinded, then the buyer may go ahead and complete the transaction.

What does hostile takeover mean?

The term hostile takeover refers to the acquisition of one company by another corporation against the wishes of the former. In a hostile takeover, the acquirer goes directly to the company’s shareholders or fights to replace management to get the acquisition approved.

What does limited liability for investors imply in a public stock company?

What does “limited liability for investors” imply in a public stock company? Shareholders who provide the risk capital are liable only to the capital specifically invested. Shareholders of Jamiro are responsible to the company only for the capital they have invested.

What is a poison pill restriction NBA?

Usually, a “poison-pill contract” is when a team extends a player before the end of his rookie deal, only to trade him before the extension kicks in.

Are poison pill defenses ethical?

As the poison pill is such a powerful tool, it has naturally created opinions as to its legal and ethical viability. Much research has been conducted that indicates that when a company, already in operation, adopts a poison pill, it is not uncommon to see a decrease in the value of the firm.

What is poison put?

A poison put is a takeover defense strategy in which the target company issues a bond that investors can redeem before its maturity date. A poison put is a type of poison pill provision designed to increase the cost a company will incur in order to acquire a target company.

Is poison pill illegal?

Some courts have found poison pills to be per se illegal. Generally, when courts find that management has refused to eliminate the pill simply for the purpose of driving up the price paid to shareholders (as a negotiating tactic), courts support the use of pills.