An antitakeover tactic used by a company to give shareholders certain rights in the event of a takeover by another firm is called ______.

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08-09-2022
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An antitakeover tactic used by a company to give shareholders certain rights in the event of a takeover by another firm is called ______.

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tutorconsortium214 tutorconsortium214 · Answer 1 · 2022-09-13T00:11:25+02:00

An antitakeover tactic used by a company to give shareholders certain rights in the event of a takeover by another firm is called the Poison pill/shareholders' right plan.

What are Poison pills?

The board of directors of a firm might adopt a shareholder rights plan, also referred to as a "poison pill," as a form of a defensive strategy to thwart a takeover.

In the area of mergers and acquisitions, shareholder rights plans were created in the early 1980s as a means of preventing takeover bids by eliminating a shareholder's ability to directly bargain the price of the sale of shares.

Usually, if one shareholder purchases a specific proportion or more of the company's shares, a scheme like this allows owners to purchase additional shares at a discount. The plan might be activated, for example, if one shareholder purchases 20% of the company's shares. At that moment, all shareholders (except the shareholder who owns 20%) will be eligible to purchase a fresh issue of shares at a discount. The bidder's stake would be significantly diluted if all other shareholders were able to purchase additional shares at a discount, which would result in a significant increase in the bid's price. Knowing that such a scheme might be implemented, the board would need to be convinced to cancel the plan in order for the bidder to be dissuaded from taking over the company without its consent.

To know more about poison pills visit:- https://brainly.com/question/15823146

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