Firm B has the option to purchase the key assets of Firm A at a predetermined fixed price should Firm A become the target in an unfriendly takeover attempt.Which term applies to the option given to Firm B?
A)Countertender offer
B)Fair price provision
C)Dual class capitalization
D)Bear hug
E)Lockup

Question

Quizplus · Accepted Answer

This option is known as a "lockup" agreement. It is a defensive strategy used by companies to prevent or discourage hostile takeovers. By giving Firm B the option to purchase key assets at a predetermined price, Firm A makes itself less attractive to potential hostile bidders, as the acquisition of these assets by Firm B could significantly reduce the value of Firm A to the acquirer.

Firm B Has the Option to Purchase the Key Assets