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Defensive Tactics: In Hostile Takeovers

Background: Mergers, acquisitions and takeovers have been a part of the business world for centuries. In today’s dynamic economic environment, companies are often faced with decisions concerning these.

Most takeovers can be referred to as friendly and occur when the management of the two firms works out an arrangement that is agreeable from both sides. But far from every takeover involves friendly transactions and noble negotiations, which will in turn make firms be willing to use defensive tactics to avoid these hostile takeovers.

One example that in this topic is highly topical is the company Skandia AB that is at the moment trying to avoid a takeover and uses defensive tactics towards the company Old Mutual PLC.

Purpose: The purpose of this thesis is to describe and analyze different defensive tactics by conducting case studies, in order to find out what kind of defensive tactics selected companies have applied as well as investigate the effectiveness of their choice.

Method: To reach a deeper knowledge in the chosen subject the authors have decided to use case studies that will be carried out to investigate different hostile takeovers and the defensive tactics that is used by the chosen firms in the empirical part.

Result: A compilation of the conducted case studies shows that shark repellent is the most frequently used defensive tactic in the chosen companies. Moreover, defenses like poison pill, white knight, standstill agreement, crown jewels, and parachutes are also used in the case studies and many of them are used in a combination of other defensive tactics.

On the basis of the case studies conducted in this thesis, it can be established that when a target firm takes defensive action this will lead to prevention of a takeover or a noticeable increased amount of money concerning the bid.
Source: Jönköping University
Author: Berggren, Jennie | Engström, Carina

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