DEFINITION of 'Kamikaze Defense '

Kamikaze defense is a type of takeover defense mechanism sometimes resorted to by a company to avoid being taken over. Not so drastic as ending its corporate life, a kamikaze defense nevertheless involves inflicting self-harm, or taking measures that are detrimental to business operations or financial condition to reduce its attractiveness to a hostile bidder. A kamikaze defense is desperate but the hope is that the takeover bid will be thwarted. 

BREAKING DOWN 'Kamikaze Defense '

A company that does not want to fall into enemy hands may as a last resort try a kamikaze defense. Normally, in an intended acquisition process, an interested party will build up a small stake in the target company and approach the Board of Directors with an offer to buy the company. If the board rebuffs the offer, which would invariably be the case if the board and its financial advisors believed that the offer "substantially unvalued" (common M&A-speak) the company, the interested party could assume a more aggressive stance to take over the company. If the would-be acquirer feels like it is getting nowhere with more pressing negotiations, it may go hostile with a tender offer (to circumvent the intransigent board) or launch a proxy battle for control of the company.

In response, the target company could seek out a white knight, a friendly party that would generally hold together current business operations of the company instead of disrupting or dismantling it, as a hostile bidder would conceivably undertake, in the view of the besieged company. Another takeover defense mechanism is adoption of a poison pill. This is generally considered a shareholder-unfriendly move, but it is mild in comparison to more kamikaze-like actions like making a dilutive acquisition, loading up on debt, or "selling crown jewels" of the company - all with the sole purpose of fighting off a hostile bidder. A kamikaze defense may succeed in the end, but the company would leave itself in a weakened state.

RELATED TERMS
  1. Self-Tender Defense

    A self-tender defense is a defense against a hostile takeover, ...
  2. Fat Man Strategy

    A fat man strategy is a takeover defense tactic which reduces ...
  3. Defensive Acquisition

    Defensive acquisition is a corporate finance strategy describing ...
  4. Defensive Stock

    A defensive stock is one that provides a constant dividend and ...
  5. Dead Hand Provision

    A dead hand provision is a special type of poison pill, in which ...
  6. Poison Put

    A poison put is a takeover defense strategy in which the target ...
Related Articles
  1. Small Business

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  2. Investing

    Mergers And Acquisitions: Understanding Takeovers

    In the language of mergers and acquisitions, battleground terms meld with bizarre metaphors to create a unique vocabulary.
  3. Investing

    3 Defense ETFs to Trade North Korean Uncertainty

    Uncertainty over U.S./North Korean relations continues to support defense stocks. These three ETFs provide exposure to increased defense spending.
  4. Investing

    A Review Of Defense Stocks

    2010 could be a good year for defense stocks. Find out why.
  5. Insights

    Despite Korea Talks, Defense Poised for Growth

    As President Trump and Kim Jong Un prepare to meet, Event Shares' Ben Phillips argues that defense spending is poised to grow.
  6. Investing

    The 3 Highest Yielding Defense Stocks

    Despite challenges, the largest defense firms will remain an integral part of the defense industry and possess yields that should appeal to investors.
  7. Investing

    Bloodletting And Knights: Medieval Investment Terms

    From bloodletting to ye olde black knights, things on Wall Street are getting downright medieval!
RELATED FAQS
  1. 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 >>
  2. A Hostile Takeover vs. Friendly Takeover

    Learn about the difference between a hostile takeover and a friendly takeover, and understand how proxy fights and tender ... Read Answer >>
  3. What's the difference between a merger and a hostile takeover?

    Understand the difference between a merger and a hostile takeover, including the different ways one company can acquire another, ... Read Answer >>
  4. What happens to the shares of a company that has been the object of a hostile takeover?

    Learn about the effect on the share price of companies that are targets of hostile takeovers, which are tactics used by famed ... Read Answer >>
  5. What are some of the top hostile takeovers of all-time?

    Learn about some of the most noteworthy hostile takeovers in history, including the KKR acquisition of RJR Nabisco and the ... Read Answer >>
Trading Center