Major Corporation wants to acquire control of Forte Company. What are some legal steps Forte can take to resist a hostile takeover?
Target companies have a variety of options available to them to assist them in resisting a hostile takeover.
• The target company can lock up the assets of the company by selling off the assets that the shark most wants.
• If the bidder is simply after a quick profit, the management of the target company can engage in "greenmail" and offer to buy back its own stock from the bidder for, say, 30 percent more than what the bidder paid.
• A poison pill that is a provision attached to the acquiring and/or transfer of stock which makes the stock much more expensive or at least less desirable to obtain. Often a company will have its charter changed so that the bidder would have to offer one of its own company shares for every share purchased from the target company's shareholders.
• The use of staggered board of directors is allowed and the result of this is that it could take several years for the acquiring company to gain total control of the board.
• The company could require supermajority voting before a transfer could take place and/or the company could elect to sell the company to someone else before the bidding company can complete its buyout.
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