In defending against a hostile takeover, the strategy that involves the target firm creating securitiesthat give their holders certain rights that become effective when a takeover is attempted is called the __________strategy.
A) shark repellent
B) golden parachute
C) greenmail
D) poison pill

Question

Quizplus · Accepted Answer

The strategy described in the question is the poison pill. This involves the target firm creating securities (usually in the form of stock options) that are triggered if a hostile takeover attempt is made. These securities can make the takeover much more expensive or difficult for the acquiring company, thereby deterring them from pursuing it further. Shark repellent, golden parachute, and greenmail are all different strategies for defending against a hostile takeover.

In Defending Against a Hostile Takeover, the Strategy That Involves