Hostile take over defensive strategies

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D R R A J U I N D U K O O R I
Hostile Take over
Defensive Strategies

2. DEFENSIVE STRATEGIES
D R R A J U I N D U K O O R I 2
a. 1. Stock Purchase
b. 2. Debt Strategies
c. 3. Employees

3. a. Stock Repurchase / Buy Back Option
•Self Tender
•Open Market Tender
1. STOCK PURCHASE
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4. Dr Raju
Indukoori
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5. b. Green Mail
• It is targeted shares repurchase
• Offer at a premium to one or few share holders holding substantial stake
• Form of targeted share repurchase through block trade.
• Differential payments for one or more share holders at premium to avoid corporate raid.
• Known in 1979 when Carl Icahn bought 9.9% of Saxon Industries for $7.21 per share on
average. Further Saxon bought at $10.50 Per share which made Icahn as an Icon of
successful corporate raider
• Paying more stands legal till it is for valid business reasons.
• Shareholders’ wealth is depleted.
1. STOCK PURCHASE
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6. b. Stand still agreement:
• It is the agreement between target company and acquiring company not to increase stake.
• It happens before acquirer starts acquiring stake in target company
1. STOCK PURCHASE
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7. 1) Bank Mail
Agreement with bank not fund hostile firm
2) Leveraged recapitalization
Aggressive borrowing or issue of debt instruments
3) Lobster Trap
T issues a charter preventing individuals holding more than 10% of
convertibles.
2. DEBT STRATEGIES
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D R R A J U I N D U K O O R I

8. 1) People Pill
Mass layoff or resignations in case of takeover.
2) Golden Parachutes / Golden Shake Hand
High employee Pay if terminated after takeover
1) Golden: Top level
2) Silver: Middle level
3) Tin: Low level
3) ESOP: Employee Stock Ownership Program/ Employee Stock Option Plan
Issue of ESOPs making the raider worried about the shares in the hands of
employees.
3. EMPLOYEES
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9. Any Questions….
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10. Thank You
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