Greenmail

AAA

DEFINITION of 'Greenmail'

An antitakeover measure that arises when a large block of stock is held by an unfriendly company that is threatening a hostile takeover. Greenmail is a term that applies to mergers and acquisitions, and refers to the money that is paid by the target company to another company, known as a corporate raider, that has purchased a majority of the target company's stock. The greenmail payment is made in an attempt to stop the takeover bid. The target company is forced to repurchase the stock at a substantial premium (the greenmail payment) to prevent the takeover. This is also known as a "bon voyage bonus" or a "goodbye kiss."

INVESTOPEDIA EXPLAINS 'Greenmail'

Like blackmail, greenmail is money that is paid to an entity to make it stop an aggressive behavior. In mergers and acquisitions, it is an antitakeover measure where the target company pays a premium, known as greenmail, to purchase its own stock shares back (at inflated prices) from a corporate raider.

Once the raider accepts the greenmail payment, generally it agrees to stop pursuing the takeover and not to purchase any more shares for a specified number of years. The term "greenmail" stems from a combination of blackmail and greenbacks (dollars). The great number of corporate mergers that occurred during the 1980s led to a wave of greenmailing. During that time, it was suspected that some corporate raiders initiated takeover bids to make money through greenmail, which no intention of following through on the takeover.

RELATED TERMS
  1. Bon Voyage Bonus

    Cash, securities or other assets paid to an individual or group ...
  2. Corporate Raider

    An investor who buys a large number of shares in a corporation ...
  3. Bankmail

    An agreement made between a company planning a takeover and a ...
  4. Whitemail

    A strategy that a takeover target uses to try and thwart an undesired ...
  5. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  6. Poison Pill

    A strategy used by corporations to discourage hostile takeovers. ...
RELATED FAQS
  1. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  2. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>
  3. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  4. Are companies with high Book Value Of Equity Per Share (BVPS) takeover targets?

    Companies with high book value of equity per share (BVPS) can be good takeover targets if those companies are public and ... Read Full Answer >>
  5. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  6. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Tender offers for share buybacks are often made at a premium to the current market price; it may be in an investor’s best ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Fundamental Analysis

    Carl Icahn's Investing Strategy

    Buying up failing investments and turning them around helped to create the "Icahn lift" phenomenon.
  3. Options & Futures

    Bloodletting And Knights: Medieval Investment Terms

    From bloodletting to ye olde black knights, things on Wall Street are getting downright medieval!
  4. Personal Finance

    The 5 Most Feared Figures In Finance

    Gates, Soros, Icahn, Rockefeller and Morgan caused chills on Wall Street.
  5. Mutual Funds & ETFs

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  6. Brokers

    10 Most Famous Public Companies That Went Private

    Here’s a list of the most popular listed companies that went private in recent decades.
  7. Fundamental Analysis

    Which US Airlines Are Poised For Long-Term Gains?

    The US airline industry has undergone a dramatic transformation since the last bear market, with one or two carriers likely to outperform in coming years.
  8. Stock Analysis

    The Delhaize/Ahold Merger: A Buy for Investors?

    The mid-2016 merger of Delhaize Group and Ahold NV will create a supermarket giant, but what will it mean from an investing perspective?
  9. Fundamental Analysis

    BP Settlement Makes It a Takeover Target

    BP's reduced legal risks make it an attractive asset due to its continued low valuation relative to peers.
  10. Investing

    How To Profit From M&A Announcements

    We look at four strategies that seek to profit from merger and acquisitions announcements.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!