People Pill

DEFINITION of 'People Pill'

A defensive strategy to ward off a hostile takeover. The target company's management team threatens that, in the event of a takeover, the entire team will resign. The purpose of a people pill is to discourage the acquiring company from completing the takeover, by introducing the possibility of having to put together an entirely new management team. This strategy is only effective if the acquiring company wants to keep the existing management.

BREAKING DOWN 'People Pill'

The first use of the people pill anti-takeover strategy is attributed to a food company called the Borden Corporation. In 1989, the company's board of directors approved a people pill that Borden could use to demand that an acquiring company pay a fair value for the company's shares and that it not fire or demote any of Borden's existing managers. The people pill strategy is a variation of the poison pill defense. Other takeover defenses include staggered boards, golden parachutes and shareholder rights plans.

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