Question

If you are to be acquired by another company, what will be the least preferred defense maneuver of your choice? Kindly explain the defense you will least likely use and elaborate further why such defense is your least among the choices.

Answer 1

Acquisition is when one company purchases shares of another company to oobtain control of the firm. Uusually they target on major assets and more than 50% of stock. But a company can defend themselves back to protect the firm from acquirer. For this purpose a lot of defense Maneuver mechanisms are used by the company.

Examples of Defense Maneuver mechanisms :

• Poison pill
• Golden parachutes
• Stock repurchase
• Crown Jewel
• Greenmail
• Pac-Man Defense
• Proxy fight and a lot others.

Except the above there are several other mechanisms as well.

According to me, the least preferred defense Manuever mechanism is Crown Jewel, where basically the firm which is going to be acquired tries to sell the major assets of the firm. Basically the entity tries to find another firm who can buy their assets. the company can buy back assets later drops the bid.

Cons of Crown Jewel mechanism:

• This is a very risky strategy.
• Reduces the value of the company.
• Reduces attractiveness of the assets.
• The company can loose all their high valued assets.
• Harms reputation of the company.

I think among all other mechanisms this can hit back at the company in worse ways, which is why as per me this is the least preferred defense mechanism.