Q. Terms, 'Greenmail defense', 'Poison pill defense', 'Crown jewel defense', 'Pac-man defense' pertain to which of the following?
Answer:
Strategy against hostile takeover
Notes:
- Greenmail defense is the practice of buying enough shares in a company to threaten a hostile takeover so that the target company will instead repurchase its shares at a premium.
- Poison pill defense strategy is used by a target firm to prevent or discourage a potential hostile takeover by an acquiring company. Potential targets use this tactic in order to make them look less attractive to the potential acquirer.
- Crown Jewel defense mechanism involves the target company spinning off its crown jewel unit, or its most valued asset, in order to make the acquisition less desirable for the acquirer. The asset could be the unit that is the most profitable unit in the company or is important for future profitability or produces the flagship product of the company.
- The Pac-Man defense is a defensive mechanism used against the hostile takeover, wherein the target firm turns around the table and acquires the firm that has made the hostile bid or has initiated the takeover.