Chapter 29, Problem 5CQ

Summary Introduction

To explain: Poison pills are good or bad for the stockholders and to explain that the acquiring firms are able to get around the poison pills.

Poison Pills:

Poison pill is a technique used by the target company to prevent itself from a hostile takeover. It is the strategy to discourage a hostile takeover. It is a pill used to eliminate the possibility of a hostile takeover.

Hostile Takeover:

It is the takeover of the target firm by an acquirer firm in which the takeover would not be approved by the management of the target firm. It is a type of takeover against the wishes of the board of directors on the takeover of the company.