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."

BREAKING DOWN '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.

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RELATED FAQS
  1. What is the difference between a poison pill defense and a suicide pill defense?

    Learn about different strategies a company uses to prevent hostile takeovers and the main difference between a poison pill ... Read Answer >>
  2. How can a company resist a hostile takeover?

    Learn about some of the defense strategies a public company's board of directors might employ to prevent a hostile bidder ... Read Answer >>
  3. How effective is a poison pill defense against a hostile takeover?

    Learn about the different types of poison pill strategies that target companies use to prevent hostile takeovers, and understand ... Read Answer >>
  4. Why is a shareholder rights plan called a "poison pill?"

    Discover why shareholder rights plans are often called "poison pills" to fight hostile takeovers and give smaller corporations ... Read Answer >>
  5. Under what circumstances might a company decide to do a hostile takeover?

    Learn about why companies use a hostile takeover to gain control of another company, and understand the different methods ... Read Answer >>
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