2. TAKEOVER TACTICS
1) Dawn Raid:-
In this tactic, brokers acting on behalf of
acquirer/Raider swoop down on stock
exchanges at the time of its opening and buy all
available shares before the target wakes up.
This is not a good tactic.
Firstly, an acquirer can get a sizeable chunk in
the dawn raid only if the scrip is highly liquid
in comparison to its total paid-up capital.
Secondly, whether the target wakes up or not,
the investors certainly would.

3. This would make the price shoot up requiring
the acquirer to shell out much more money.
It may also happen that the investors, sensing
the acquisition, may hold back the quantity
offered thereby reducing the liquidity and
making the dawn raid fail.
2) Bear Hug:-
The acquirer makes a very attractive tender
offer to the mgmt. of the target company
for the latter’s shareholders and asks them
to consider the same offer in the interest of
the shareholders.
This is a sound tactic.
Normally, such an offer is backed by the
acquirer’s preparedness to make a hostile
open offer to the public shareholders if the
board of the target company rejects the

4. If the offer is really very good for the
public shareholders, the board generally
cannot reject it just to protect the interests
of the promoters of the target company.
This is so because if they reject the offer on
playful grounds, chances are that the public
shareholders, particularly institutional
shareholders, would favorably respond to
the offer either through private negotiated
deals or in the subsequent hostile open offer
made by the acquirer.

5. 3) Saturday Night Special:-
This is the same tactic 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 promoter/board of the target
company to set up their defenses.
This is also called ‘Godfather Offer’

6. 4) Proxy Fight:-
In this tactic, 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.
This method in which the control is sought to
be acquired without acquisition is not
sustainable since every time the acquirer
will have to keep on acquiring proxies from
the geographically scattered shareholders.
Also, such removal or appointment of
majority of directors will be treated as an
acquisition of control over the target
company requiring the acquirer to make an

7. DEFENCE TACTICS
1) Crown Jewels:-
The target company sells its highly
profitable or attractive business/division
to make the takeover bid less attractive to
the raider.
It is needless to add that no company will
like to resort to selling its profitable
business unless its is forced to do so.

8. 2) Blank Cheque:-
The target company makes a preferential
allotment to existing promoters or friendly
shareholders to increase the control of the
promoter group.
In India such preferential issue is governed by
the SEBI which stipulate a pricing formula
based on the past 26 weeks’ and past 2 weeks’
prices.
Due to this, this issue become expensive
because the existing promoters have to pay a
price close to the market price.
Normally, existing promoters of the target
company would be holding shares in excess of
15%.

9. 3) Shark Repellents:-
The target company amends its charter , i.e.,
MOA or AOA or the like to make the
takeover expensive or impossible.
Another shark repellent could be
stipulating that a super majority (say 90%)
would be required to approve a merger.
This would make it impossible for the
acquirer to merge the target company with
the acquirer company.
This tactic would work only if the actual
merger is critical to achieve synergies and
the acquisition would be unviable without
such synergies derived from the merger.

10. 4) Grey Knight:-
In this tactic, the services of a friendly
company or a group of investors are
engaged to acquire shares of the raider
itself to keep the raider busy defending
himself and eventually force a break.
5) White Knight:-
In this tactic, the target company or its
existing promoters enlist the services of
another company or group of investors to
act as a white knight who actually takes
over the target company, thereby foiling
the bid of the raider and retaining the
control of existing promoters.

11. 6) Golden Parachute:-
In this tactics, a contractual guarantee of a
fairly large sum of compensation is issued to
the top and /or senior executives of the
target company whose services are likely to
be terminated in case the takeover succeeds.
However, this is not the tactic for defending
the company from takeover but ensure that
the existing top management is well taken
care of in case the takeover initiative
becomes successful.

12. 7) Pacman:-
The target company or its promoters start
acquiring sizeable holding in the
acquirer/raider’s company, threatening to
acquire the raider itself.
This makes the acquirer run for cover and
forces him to hammer out a truce.
This tactic is possible in India prior to the
acquirer hitting the trigger for open offer
and making the public announcement thereof.

13. 8) Green Mail:-
The target company or the existing
promoters arrange through friendly
investors to accumulate large stock of its
shares with a view to raise its market price.
Very expensive for raider.
Sometimes a ‘green mail’ is used to describe
an arrangement called ‘target block
repurchase with standstill agreement’.
This means that the existing promoters of
the target company agree to buy back the
shares being accumulated by the raider at a
substantial premium.
In return, the raider enters into agreement
that neither he nor any of his associates
shall acquire any sizeable stake in the

14. 9) Poison Pill:-
Term is used to generally refer to any
strategy which, upon a successful acquisition
by the acquirer, creates negative financial
results and leads to value destruction.
Poison Pill can take various forms:-
i. The target company may issue rights/warrants
to the existing shareholders entitling them to
acquire large number of shares in the event an
acquirer’s stake in the company reaches a
certain level (say 30%).
The acquisition price would be very lucrative
to the shareholders so they would certainly
exercise their right upon acquisition of the
trigger % by the acquirer, thereby diluting the
acquirer’s stake.

15. ii. The target company may add to its charter a
provision that gives the current shareholders
a right to sell their shares to the acquirer at
an increased price (say 100% above the last 2
or 4 week’s avg price), if the acquirer’ stake in
the company reaches a certain limit (say 30%).
This kind of poison pill may not be able to
stop a determined acquirer, but would at
least ensure a high exit price for the existing
shareholders.
iii. The target company may borrow large long-
term funds from banks or financial
institutions, or other lenders, for its genuine
need.
The repayment terms would be such that in
the normal course the loan would become
repayable towards the end and also in a

16. iv. In a different version of the tactic in the
point above, the target company may borrow
not for its genuine needs but for paying one
time huge dividend to the shareholders. This
tactic is known as ‘leveraged cash out’.
In this tactic, the target company’s financial
health would get negatively affected
immediately and if the acquirer dos not
proceed with the acquisition, the existing
promoters would have to face the music.
v. Another variation of the strategy under point
3 above, the target company may buy-back its
shares using borrowed funds. This will have a
double effect of increasing promoters’ stake
and the negative effect on cash flows.
The latter would make the target company
less attractive.

17. 10) Poison Put:-
11) People Pill:-
In this tactics, current mgmt. team of the
target company threatens to quit en masse in
the event of a successful hostile takeover.
If the mgmt. team is really efficient, the
company will be left without experienced
leadership following a takeover.
This may discourage an acquirer from
proceeding further provided, of course, if he
is not able to bring in equally effective
management from his own team or from out
side.

18. 12) Scorched Earth:-
It is originally a military tactic that involves
destroying anything that might be useful to
the enemy while retreating from an area.
As a takeover defence, it virtually destroys
a company while it is being taken over or
when it is likely to face a takeover threat.
This could be achieved either though extreme
form of poison pill or extreme form of
crown jewel tactic or through stripping of
significant assets.

19. BUY-BACK AS A TAKEOVER DEFENCE
TACTIC.