What is the main difference between a proactive and a reactive anti-take over measure? Describe two...

What is the main difference between a proactive and a reactive anti-take over measure? Describe two examples of each.

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Expert Solution

A proactive anti-take over measure is when steps are taken to prevent a hostile takeover before there is any indication of a takeover by a hostile company

A reactive anti-take over measure is when steps are taken to prevent a hostile takeover after there is a hostile takeover bid

Two examples of proactive anti-take over measures are :

Staggered board - This is when only a low number of directors are re-elected annually. This gives more control to the majority shareholders
Stock repurchase - Stock repurchases can be done when there is no hostile takeover bid. This increases control of the majority shareholders

Two examples of reactive anti-take over measures are :

Poison pill - This is when shares are offered to existing shareholders at a substantial discount to market price.
Golden parachute - This is when an agreement is made to give a substantial additional compensation to top management in case of a successful hostile takeover bid

jeff jeffy answered 1 year ago

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