Suicide Pill

AAA

DEFINITION of 'Suicide Pill'

A defensive strategy by which a target company engages in an activity that might actually ruin the company rather than prevent the hostile takeover. Suicide pills are extreme actions that differ from situation to situation, some of which result in disolving the company; however, the underlying intent is to avoid the hostile takeover of the firm by any means necessary.


Also known as the "Jonestown Defense."

INVESTOPEDIA EXPLAINS 'Suicide Pill'

The suicide pill defense can be viewed as an extreme version of the poison pill. Such a defense is most often implemented in situations where a competitor attempts a hostile takeover of a firm, and the target's management or current ownership, viewing the takeover as a forgone conclusion, would prefer the company cease to exist than see the firm taken over by the competitor. Taking on excessive amounts of debt would be one form of a suicide pill.

RELATED TERMS
  1. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative ...
  2. Management Buyout - MBO

    A transaction where a company’s management team purchases the ...
  3. Whitemail

    A strategy that a takeover target uses to try and thwart an undesired ...
  4. Jonestown Defense

    A defensive strategy by which the target company engages in an ...
  5. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  6. Voting Shares

    Shares that give the stockholder the right to vote on matters ...
RELATED FAQS
  1. What is the difference between a poison pill defense and a suicide pill defense?

    A poison pill defense and a suicide pill defense are two different defense strategies a company may use to thwart a hostile ... Read Full Answer >>
  2. What happens to the stock prices of two companies involved in an acquisition?

    When a firm acquires another entity, there usually is a predictable short-term effect on the stock price of both companies. ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
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. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  3. Investing

    Top Tips on Catering to Millennial Clients

    The economic impact of Millennials is rapidly growing. Here's how to reach them.
  4. Investing

    What Can A Conference Call Tell About Trends?

    Messages in a company conference call can be easily misconstrued. But there is a way to cut through the talking points to get to the real substance.
  5. 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.
  6. 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?
  7. Economics

    Who Are the Baby Boomers?

    Baby boomer is a descriptive term for a person who was born between the years 1946 and 1964.
  8. 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.
  9. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  10. Economics

    Understanding Organizational Behavior

    Organizational behavior is the study of how humans interact in group environments.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. 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 ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
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!