CENTRE FOR MBA, PKRMC

AN
ASSIGNMENT

ON
M, A & C

TOPIC: MODULE 1 AND MODULE 2

SUBMITTED TO, SUBMITTED BY,

SHIJINA S

ASST.PROFESSOR
CENTRE FOR MBA

SUBMITTED ON:
UNIT 1

1. Corporate Restructuring: Concept, Reasons for Restructuring, Barriers to Restructuring, Types

of Corporate Restructuring,

2. Synergy: Operating Synergy, Financial Synergy,

3. Hubris Hypothesis of Takeovers,

4. Strategic Alliances: types

UNIT 2

1. Introduction in Mergers: Concept, Classification of Mergers, Motives behind M & A, Procedure

of M & A, Reasons for failure, Reverse Merger, Recent Examples of M & A in India,

2. Concept of Acquisition and types of Acquisitions, Reasons,

3. Defense against hostile takeover, Poisson Pill, Bear Hug, Greenmail, Pacman. Etc.,
CORPORATE RESTRUCTURE

It can be defined as

 Any change in the business capacity or portfolio that is carried out by an inorganic route or
 A change in the capital structure of a company that is not a part of its ordinary course of business or
 Any change in the ownership of or control over the management of the company or a combination there
of.

REASONS FOR CORPORATE RESTRUCTURING

 Internal factors

 Operational Inefficiencies
 High Operational Costs
 Change in Leadership or Management Vision
 Financial Pressures
 Labor Issues and Union Negotiations
 Cultural Misalignment

 External factors

 Globalization and Competition

 Natural Disasters / Global Pandemics
 Environmental Sustainability

NEEDS OF CORPORATE RESTRUCTURING

 To focus on basic strengths, operational synergy & other effective allocation of managerial capabilities
and infrastructure too.
 Consolidation and economies of scale by expansion and diversion to exploit extended domestic and
global markets.
 Revival and rehabilitation of a sick unit by adjusting losses of the sick unit with profits of a healthy
company.
 Acquiring a constant supply of raw materials and access to scientific research and technological
developments.
 Capital restructuring by a suitable combination of loan and equity funds to decrease the cost of servicing
and improve the return on capital employed.
 Improve corporate performance to bring it on par with competitors by adopting the radical changes
brought out by information technology.
 Adaptation to changing Market conditions
 Enhancing Operational efficiency
 Unlocking Hidden potential
 Managing Financial Challenges:

BARRIERS TO CORPORATE RESTRUCTURING, INCLUDING

 Resistance to change: Employees, managers, customers, and suppliers may resist change because they
fear losing their jobs, skills, status, or relationships.
 Poor communication: Poor communication strategies can be a barrier to change, especially in large
organizations.
 Lack of resources: Insufficient resources or a tight budget can be a barrier to change.
  Lack of management support: If management doesn't support the change, it can be difficult to
implement.
 Unrealistic expectations: Unrealistic expectations or timelines can be a barrier to change.
 Lack of clarity: If the change is not clear, it can be difficult to implement.
 Lack of skills: A lack of skills or change management knowledge can be a barrier to change.
 Inadequate organizational infrastructure: An inadequate organizational infrastructure can be a
barrier to change.
 Behavioral barriers: Behavioral barriers can include resistance to change, groupthink, and risk
aversion.
 Lack of consistency: Lack of consistency can be a barrier to change.

MAIN FORMS OF CORPORATE RESTRUCTURING

1,Merger 2,Consolidation

3,Acquisition 4,Divestiture

5,Demerger 6,Carve out

7,Joint venture 8,Reduction of capital

9,Buy back of securities 10,Delisting of securities /company

1,Merger

 A merger is a corporate strategy involving the combining of two or more companies into a single entity.
 This can happen through various methods, such as a stock swap, cash payment, or a combination of
both.

Eg: HDFC LTD/HDFC BANK Merger

2.Acquisition

 An acquisition is a financial transaction that occurs when one business acquires the majority or all of its
target's shares.
 The goal of an acquisition is to gain control of the target's operations, including its assets, production
facilities, resources, market share, customer base, and other elements.

Eg:Disney acquiring 21st Century Fox.

3. Demerger

 A demerger is when a company splits off one or more divisions to operate independently or be sold off.
 It may take place for several reasons, including focusing on a company's core operations by spinning off
less relevant business units, raising capital, or discouraging a hostile takeover.

Eg: Tata Motors approved the proposal of demerger of Tata Motors into two separate listed companies
housing: the Commercial Vehicles business and its related investments in one entity and the Passenger
Vehicles businesses including PV, EV, JLR and its related investments in another entity.

4,Joint venture

 Under this strategy, an entity is formed by two or more companies to undertake financial act together.
The entity created is called the Joint Venture.
  Both the parties agree to contribute in proportion as agreed to form a new entity and also share the
expenses, revenues and control of the company.

Eg: partnership between Honda and LG Energy Solutions. With its expertise in battery modules, LG is building
a battery plant for Honda's electric vehicles, demonstrating the benefits for suppliers

5,Buy back of securities

 Buybacks reduce the number of shares available on the open market.

 Companies usually buy back shares of their stock to increase the value of the remaining shares by
reducing the supply of them.
 They may also buy back shares to prevent a major shareholder from taking a controlling stake in the
company

Eg: In early May 2024, Apple announced a share repurchase authorization of $110 billion. The news
made headlines because it is the largest share buyback authorization in U.S. history. The iPhone maker
previously authorized share repurchases of $90 billion in 2023 and $100 billion in 2018, according to
Bloomberg.

6.Consolidation

 Consolidation happens when two or more companies merge to become one.

 Also known as amalgamation, business consolidation is most often associated with M&A activity.
 This generally happens when several similar, smaller businesses combine to form a new, larger legal
entity.

Eg: Exxon and Mobil, two distinct oil companies, consolidated through a merger in 1998. After the merger,
both Exxon and Mobil ceased to exist separately and formed a new legal entity, ExxonMobil

7. Divestiture

 A divestiture is the partial or full disposal of a company or other entity's operations or assets through
sale, exchange, closure, or bankruptcy.
 A divestiture most commonly results from a management decision to cease operating a business unit
because it is not part of a company's core competency.
 Eg: IBM and Lenovo: Focusing on Core Competencies. In 2005, IBM made a strategic decision to sell
its Personal Computing Division to Lenovo for approximately $1.25 billion.

Eg.,selling off of Air India, Container Corporation of India, and Bharat Petroleum Corporation (BPCL).

8. Carve out

 A carve-out is the partial divestiture of a business unit in which a parent company sells a minority
interest of a subsidiary to outside investors
 Through the process of an Equity Carve-Out, a company tactically separates a subsidiary from its
parent as a standalone company.
 Eg: General Electric (GE) conducting an IPO of Synchrony Financial to create an independent
consumer finance company

9. Reduction of capital

 Capital reduction is a corporate restructuring process that involves reducing a company's shareholding
equity.
  It can be done through a variety of methods, including: Share cancellations, Share repurchases
(buybacks), Paying back capital to shareholders, Writing off capital against accumulated losses, and
Paying off paid-up share capital that exceeds the company's requirements

10,Delisting of securities /company

 Delisting is the process of removing a company's shares from a stock exchange, making them unavailable
for trading. Delisting can be voluntary or involuntary:
Voluntary delisting
A company chooses to delist its shares, often to restructure or go private.
Involuntary delisting
A company is removed from the exchange for failing to meet listing requirements

SYNERGY

 Synergy is a strategy where individuals or entities combine their efforts and resources to accomplish more
collectively than they could individually.
 It eventually results in increased productivity, efficiency, and performance. Its best example is mergers and
acquisitions, where the new company will provide more value than the two businesses independently.
 Synergy is a method in which individuals or organizations pool their resources and efforts to enhance value,
productivity, efficacy, and performance more than they could individually.
 It can be both positive and negative. If a group of people or businesses collaborates constructively to
achieve a common goal, the result will be better (positive) than if they worked alone and vice versa

 Manufacturing synergy

 Operations synergy

 Marketing synergy

 Financial synergy

 Tax synergy

1,Manufacturing synergy

It involves combining the core competencies of the acquirer company and the target company in different areas
of manufacturing ,technology, design and development, procurement etc.it could also mean rationalizing usage
of combined manufacturing capacities.

2, Operations synergy

It involves rationalising the combined operations in such a manner that through sharing of facilities such as
warehouse, transportation facilities, software and common services such as accounts and finance ,facilities,
software etc. Duplication is avoided or logistics are improved leading to quantum cost saving.

3, Marketing synergy

It involves using either the common sales force or distribution channel or media to push the products and
brands of both the acquirer and target companies at lower costs than the sum total of costs that they would incur
in independent marketing operations.
4, Financial synergy

It involves combining both the acquirer and target company’s balance sheet to achieve either a reduction in the
weighted average cost of capital or a better gearing ratio or other improved financial parameter.

5, Tax synergy

It involves merging a loss making company with a profitable one so that the profitable company can get tax
benefits by writing off accumulated losses of the loss making company against the profits of the profit making
company.

THE HUBRIS THEORY

 The theory of managerial hubris (Roll, 1986) was proposed by Richard Roll, who postulated that managers
may have good intentions in increasing their firm’s value but, being over-confident; they over-estimate their
abilities to create synergies.
 The Hubris theory constitutes a psychological based approach to explain M&As.
 It states that the management of acquiring firms over rates their ability to evaluate potential acquisition
targets.
 The hubris theory states that when a merger or acquisition announcement is made, the shareholders of the
bidding firm incur a loss in terms of the share price while those of the target firm generally enjoy a contrary
effect.
 The prime reason behind this is that when a firm announces a merger offer to the target, the share price of
the target firm increases because shareholders in the target firm are ready to transfer shares in response to
the high premium that will be offered by the Acquiring firm, (Machiraju, 2010).
 The risk of potential failure, due to overrated acquisition price which significantly exceeds the fair value of
the target company, increases in an auction.

Critics of the Theory.

1.The hubris hypothesis is not supported by the analysis of the joint impact of the uphill movement of the
target’s stock and the downhill movement of the acquirer’s stock. Before two companies merge and acquire
another, there should be a proper analysis and several approval stages that have to be met for example
undertaking independent valuation of the target.

2. There is no systematic and reliable approach than relying merely on subjective judgments and gut instincts it
does difficult to a hubristic leadership research

STRATEGIC ALLIANCE

Definition of Strategic alliances

 Strategic alliances are cooperative agreements between two or more companies to work together and
share resources to achieve a common business objective, Each company maintains its autonomy while
gaining a new opportunity
 A global strategic alliance is an agreement among two or more independent firm to co-operate for the
purpose of achieving common goal such as a competitive advantage or customer value creation while
independent
 Strategic alliances are agreements between companies (partners) to reach objectives of a common
interest. Alliances are among the various options which companies can use to achieve their goals. They
are based on cooperation between Companies
MOTIVES

 Adding value to product.

 Improving market access.

 Strengthening operations.

 Adding technological strength.

 Enhancing strategic growth.

 Building finance strength.

 New market entry

PROCESS

1. Setting alliance strategy

2. Selecting a partner

3. Structuring the alliance

4. Managing the alliance

5. Re valuating the alliance

KEY FACTORS

 Select the proper partners for the intended goals Share the right information
 Negotiate A deal that includes risk and benefit
 Come to a realistic agreement on the time
 Mutual, flexible commitment on what’s suitable to change, measure and share within each partner’s
culture
 Respect and protect the brand of each partner

TYPES

 Joint Venture: an agreement by two or more parties to form a single entity to undertake a certain
project. Each of the businesses has an equity stake in the individual business and share revenues,
expenses & profits.
 Global Strategic Alliances: working partnerships between companies (often more than 2) across
national boundaries & increasingly across industries. Sometimes formed between company & a foreign
government, or among companies & governments
 Equity strategic alliance: an alliance in which 2 or more firms own different percentages of the
company they have formed by combining some of their resources & capabilities to create a competitive
advantage.
 Non-equity strategic alliance: an alliance in which 2 or more firms develop a contractual-relationship
to share some of their unique resources & capabilities to create a competitive advantage.

DISADVANTAGES

 The Irreconcilable differences in culture and management styles.

 Business Significant Objectives
  Loss of control over such important issues as product quality, operating costs, employees, etc.
 Mistakes Leading to Failure
 One of the partners is too dependent on the other’s capabilities.
 Problems and mistrust.
 Cultural & language barriers.
 Collaboration in competitively sensitive areas can be difficult.
 A clash of egos might occur.

ADVANTAGES

 Improve organization efficiency.

 Offer to access new market and technologies.
 Reduce the impact of risk.
 Learning from partners
 Alliance could help a company develop a more effective process expand into a new market or develop
an advantage over a competitor.

Examples of Alliances

 Nokia and Microsoft in alliance to make Zune phone

 Star Alliance – Airlines alliances.
 Philips and Sony jointly launched the mini-CD.
 Nestlé and Fonterra Sign Agreement on Dairy Alliance for
 McDonald’s with Disney, Coca-Cola & Walmart
 Motorola-Toshiba: In 1987- Toshiba to produce microprocessors & contribute access to the distribution
network.

JOINT VENTURE

 A joint venture is when two or more companies perform a business project together for a set period of
time.
 Joint Venture is a win/win collaboration between two or more Companies, sharing resources to solve
common problems and achieve goals.
 It can be called a Strategic Alliance or Partnering as well.

Characteristics of a Joint Venture

 It is a which comes to an end after the completion of a particular venture.

 It is for a specific venture.

 The partnership is without the use of a firm name. The main purpose it to make profit and to distribute it
among all co- ventures. Loss, if any, will also be borne in agreed ratio or equally
MERGER

 It is the combination of two companies to from one new company. The combination of 2 companies
involves transfer of ownership.
 Both the companies surrender their stock and issue stock as anew company.

Ways of merger:

 By purchasing of assets

 By purchasing common shares

 By exchanging shares for assets

 By exchanging shares for shares

Acquiring company: it is a single existing company that purchases the majority of equity shares of one or
more companies.

Acquired companies: these are those companies that surrender the majority of their equity shares to an

acquiring company

Importance

 Market expansion
 Economies of scale
 Diversification
 Acess to resources

REASONS FOR MERGERS

Economy of scale Operating economies

Enhanced marketing capacity Access to new technology or patent

Increase value of the company Strategic Growth

Better financial planning Increased Market Share

Eliminate competition and reduce cost Cost Savings and Synergies

Access to New Technologies or Expertise Risk Mitigation

Enhanced Financial Performance Strategic Realignment

TYPES OF MERGER

1. Horizontal merger

2. Vertical merger

3. Conglomerate merger

4. Concentric merger

5. Market extension merger

6. Product extension merger

1.HORIZONTAL MERGER

 A merger occurring between companies producing similar products ,goods and services.
 This type of merger occurs frequently as a result of larger companies attempting to create more effective
economies of scale.
 A horizontal merger occurs when 2 or more firms in the same market ,producing substitute products
,join together to form a single firm.

Eg: 1. disnep( acquirer) and hotstar(target) =disnep plus hotstar

2. VERTICAL MERGER

 It is a merger between 2 companies producing different goods or services for one specific finished
product.
 It occurs when 2 or more firms ,operating at different levels with in an industry’s supplychain ,merge
operations.
 It can be forward merger and backward merger.

Eg: zee entertainment (broadcaster) and dish tv (distribution platform)

3.CONGLOMERATE MERGER

 In here the merging firms are not competitiors, but use common or related production processes and /or
marketing and distribution channel.it means 2 companies that have no common business areas.
 It happens when 2 companies decide to combine to achieve diversification and cost saving synergies.

Eg: walt Disney and American broadcast company.

4.MARKET EXTENSION MERGER

 A market extension refers to the coming together of 2 companies that produce or sell the same type of
product but to different markets.
 It takes place between 2 companies that deal in the same products but in separate market.
 The goal of market extension merger is to gain access to a larger market and thus a bigger
client/customer base

Eg: mittal steel and arcelor steel.

5.PRODUCT EXTENSION MERGER

 It takes place between 2 business organisation that deal in products that are related to each other and
operate in the market.
  It allows the merging companies to group together their products and get access to a bigger set of
companies

Eg:pizza hut and pepsi co.

6.CONCENTRIC MERGER

 The merger of firms which are into similar type of business

HOW TO GET FUND FOR MERGE

1. Equity Financing

2. Debt Financing

3. Asset Sales

4. Private Equity Investment: Companies can seek investment from private equity firms or venture
capitalists to finance the merger. Private equity investors can provide capital in exchange for equity
ownership or other financial instruments.

5. Joint Ventures or Partnerships

6. Cash Reserves: Companies can use their existing cash reserves or retained earnings to fund the merger.
This approach avoids taking on additional debt or diluting ownership but may limit financial flexibility.

LEGAL PROCEDURE FOR MERGER

1. Examination of object clause.

2. Intimation to stock exchange.

3. Approval of the draft merger proposed by the respective boared.

4. Application to national company law tribunal(NCLT).

5. Dispatch of notice to shareholders and creditors

6. Holding of meeting of shareholders and creditors.

7. Petition for NCLT for confirmation and passing of NCLT orders

8. Filling the orders with the registrar.

9. Transfer of assetes and liabilities.

10. Issue of shares and debentures

LAWS REGULATING MERGER

 The companies act 2013

 The competition act 2002

 FEMA 1999

 SEBI

 The Indian income tax act (ITA) 1961

 REVERSE MERGER

• A reverse merger is an attractive strategic option for managers of private companies to gain public
company status.

• It is a less time-consuming and less costly alternative to the conventional initial public offerings (IPOs).

• Public company management enjoy greater flexibility in terms of financing alternatives, and the
company's investors enjoy greater liquidity.

• Public companies face additional compliance burdens and must ensure that sufficient time and energy
continues to be devoted to running and growing the business.

• A successful reverse merger can increase the value of a company's stock and its liquidity.

ADVANTAGES DISADVANTAGES

A Simplified Process Due Diligence Required

Less Risk Risky Stock Will Be Dumped

Less Dependence on Market Conditions No Demand for Shares Post Merger

Benefits of a Public Company Regulatory and Compliance Burden

ACQUISITION

When a company takes over another company and clearly established itself as a new owner , the purchase is
called an acquisition.

1. Friendly

2. Reverse

3. Back flip

4. Hostile

Types

1. friendly: both the companies approve the acquisition under friendly terms

Eg: johnson and johnson + crucell

2. reverse : a private company takes over a public company

Eg: clearwire + xohm

3. backflip : the purchasing company becomes a subsidiary of the purchased company

Eg: Texas air composites + continental airlines

4. hostile : here the entire process is done by force

Eg: oracle + people soft

 Basis Merger Acquisition

Transaction Growth (value generation) Growth (value generation)

motive

Post deal New entity ,sometimes with a new name The target company is absorbed
entity into the acquirer

Nature of Friendly definition Can be friendly or hostile

transaction

valuation Tends to be lower, as both side have an Typically higher ,as one side
incentive to make it work. wants to maximise the financial
value of the deal

Post deal The new entity tends to be a combination Usually the board at the acquiring
management of both boards firm remains the same post
transaction

Time required Tends to be time consuming as the parties Usually faster an shareholder
to close the trash out complex terms approvald cleaner as one side
deal only has to achieve

Legal costs Considerably higher given the nature of Tend to be lower ,given the
the deal relative straight forward nature of
the deal

ADVANTAGES AND DISADVANTAGES OF MERGER

PROS CONS

Economies of scale Higher prices

Lower prices from the efficiency of scale A firm with monopoly power may become
and synergy inefficient

More investment and research from higher 2 different firms may struggle to merge
profit

Can save an unprofitable firm from going Less choice for customers and loss jobs
out of business
 ADVANTAGES AND DISADVANTAGES OF ACQUISITION

PROS CONS

Increased market share, speed to market, Inadequate valuation of target

diversification

Lower risk comparing to develop new product Inability to achieve synergy

Avoid excessive competition Finance by taking huge debt

HOSTILE TAKE OVER

TAKE OVER

 A takeover usually occurs when one company makes a bid to take control of or acquire another, often by
buying a majority stake in the target company.
 The company making the bid is called acquirer in the acquisition process

FRIENDLY TAKE OVER HOSTILE TAKE OVER

Before a bidder makes an offer for another Allows a suitor to bypass a target company’s
company management unwilling to agree to a merger or take
over

It usually first informs that company’s board In here the target company rejects the offer, but the
of directors bidder continuous to pursue it.

If the board feels that accepting the offer The bidder makes the offer without informing the
serves shareholders better than rejecting it target company’s board before hand

It is charecterised by bargaining until It can be conducted through bear bug, proxy contest
agreement is signed etc.

TACTICS USED BY ACQUIRER

 Casual Pass
 Open Market Purchases and Street Sweeps
 Dawn Raid
 Bear Hug
 Saturday Night Special
 Proxy Fights
 Tender Offer
1,Casual Pass

 Before initiating a takeover initiative, the bidder may attempt some informal overture to the
management of the target.
 This is sometimes referred to as casual pass. It may come from a member of the bidder’s management
or from one of its representatives, such as its investment banker.
 A casual pass may be used if the bidder is unsure of the target’s response.

2,Street Sweeps

 This refers to the technique where the acquiring company accumulates larger number of shares in a
target before making an open offer.
 The advantage is that the target company is left with no choice but to agree to the proposal of acquirer
for takeover.
 An offer of a stock allowing institutional investors and (occasionally) high net-worth individuals to buy
a large percentage of a company's equity, usually at a price higher than the previous offer of stock.
 Street sweeps are fairly common in takeovers; they may also be used as antitakeover measures.

3,Dawn Raid

 In this tactics, the broker acting on behalf of the acquirer swoop down on stock exchange (s) at the time
of its opening and buy all available shares before the target wakes up.
 This tactics to succeed, the scrip, has to be highly liquid.
 Even if the target does not wake up, investors would and the price is likely to go up.
 Indian takeover code prohibit the acquirer, along with the persons acting in concert from acquiring 15%
or more shares or voting capital (including the shares and voting capital already held) of the target
company without making an open offer.

4,Bear Hug

 The acquirer makes a very attractive tender offer to the management of the target company for the
latter's shareholders and asks them to consider the same offer in the interest of the shareholders.
 Though such offer of the acquirer is unsolicited, the board of the target company is bound to consider it
impartially on account of its fiduciary capacity in protecting public shareholders' interests.
 Further if the offer is really good, the board cannot reject it just on frivolous ground to protect the
interest of the promoters of the target.
 Chances are that the public shareholders and particularly institutional shareholders would favorably
respond.

5,Saturday Night Special

 This is the same tactics as bear hug, but made on the Friday or Saturday night (last working day of a
week) asking for a decision by Monday (first working day of the next week).
 The idea behind this is to give very little time to the promoters / board of the target company to set up
their defenses. This is also called “Godfather Offer”.

6, Proxy Fight

 In this tactics, the acquirer convinces majority (in value) shareholders to issue proxy rights in his favor,
so that he can remove the existing directors from the board of the target company and appoint his own
nominees.
  However, this method in which the control is sought without acquisition may not be sustainable since
every time the acquirer will have to keep on acquiring proxies from scattered shareholders.
 Also, such removal or appointment of majority directors will be treated as an acquisition of control over
the target company requiring the acquirer to make an open offer.
 Hence proxy fight can not be a tactics for hostile acquisition.

7,Tender Offer

 A company usually resorts to tender offer when a friendly negotiated transaction does not appear to be a
viable alternative.
 In using tender offer, the bidder may be able to circumvent management and obtain control even when
the managers oppose the takeover.
 The costs associated with a tender offer such as legal filing fees and publication costs. make the tender
offer a more expensive alternative than a negotiated deal.
 The initiation of a tender offer usually means that the company will be taken over although not
necessarily by the firm that initiated the tender offer.
 Another firm may enter the bidding process and seek to engage in the bidding contest. This may in turn
increase the cost of purchase.

DEFENCE

ACTIVE MEASURES PREVENTIVE MEASURES

1. Green mail 1. Poison pill

2.Standstill agreement 2.Flip in plan

3.White knight 3.Flip over plan

4.White squire 4.Back end plan

5.Pac man defence 5.Voting plan

6.Restructuring 6.People pill

Green mail

 Greenmail 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.
 Regarding mergers and acquisitions, the company makes a greenmail payment as a defensive measure
to stop the takeover bid.
 The target company must repurchase the stock at a substantial premium to thwart the takeover, which
results in a considerable profit for the greenmailer.
Stand still agreement

 A standstill agreement can effectively stall or stop the process of a hostile takeover if the parties cannot
negotiate a friendly deal.
 The agreement can be used to halt a hostile takeover attempt, typically at the price of a cash payment to
the potential acquirer that involves a buyback of the shares already held by the acquirer at a premium.
 Or, the target company may grant the acquirer a board seat in exchange for not increasing its share
holdings.

White knight

 A white knight is a hostile takeover defense whereby a 'friendly' individual or company acquires a
corporation at fair consideration when it is on the verge of being taken over by an 'unfriendly' bidder or
acquirer.
 The unfriendly bidder is generally known as the "black knight
 A white knight is an individual that acts as the defensive entity for a company amidst a takeover.
 The white knight business is to ensure the takeover is being executed by a friendly entity and that the
decisions made during the whole process are in the favor of the business and its shareholders.

White squire

 A white squire is an individual or company that buys a large enough stake in the target company to
prevent that company from being taken over by a black knight.
 In other words, a white squire purchases enough shares in a target company to prevent a hostile
takeover.
 A white squire is similar to a white knight. Both terms refer to an investor or company that is helping a
company reject a hostile takeover.

Pac man defence

 The Pac-Man Defense is a strategy used by targeted companies to prevent a hostile takeover.
 This takeover prevention strategy is implemented by the target company turning things around by trying
to take over the acquirer.
 In a Pac-Man defense, the target firm then tries to acquire the company that has made a hostile takeover
attempt.
 In an attempt to scare off the would-be acquirers, the takeover target may use any method to acquire the
other company, including dipping into its war chest for cash to buy a majority stake in the other
company.

Poison pill

 A poison pill is a defense tactic listed companies use to deter activist investors or acquirers from
acquiring enough shares to take control or staging a takeover without the board's consent.
 The poison pill is generally very effective in warding off any hostile takeover bids by making the deal
less attractive for the acquirer.

Types

Flip in plan Flip over plan

Back end plan Voting plan

Flip in plan

 The flip-in poison pill is a takeover defense mechanism that can be implemented by a company to deter
hostile takeovers.
 One benefit of this tactic is that it allows existing shareholders to purchase additional shares at a
discounted price, making a hostile takeover less attractive.
 Flip-in poison pill is a provision enabling shareholders, other than the acquirer, to buy additional stock
at a discount to deter hostile takeover attempts.

Flip over plan

 Flip-Over Poison Pill is a defensive strategy that enables shareholders to purchase shares at a highly
discounted price in an acquiring company.
 If the technique is adopted and the acquisition turns successful, the target firms’ shareholders will dilute
the equity of the acquiring firm.
 It gets triggered when a hostile bid is successful, and strategy is commonly used to combat unwanted
takeover attempts.

Back end plan

 A back-end plan refers to an anti-takeover measure that investors use when trading their existing shares
in the market.
 A back-end plan, also known as a note purchase rights plan, is a type of poison pill defense. Poison pill
defenses are used by companies to prevent a hostile takeover by an outside company.
 The key characteristic of a hostile takeover is that the target company's management does not want the
deal to go through

Voting plan

 A voting poison pill plan refers to a strategy used by a target company to foil a hostile takeover bid.
 This anti-takeover strategy entails a target company giving special voting rights to its shareholders by
issuing more shares so that the shareholders can cause a dilution of shares and make the acquisition bid
less attractive.
 The voting poison pill is a strategy used to dilute controlling powers from an acquiring firm