DEFINITION of People Poison Pill
A people pill is 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 Poison 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.
Pick Your Poison
Any number of tools can be used by companies looking to avoid a takeover, up to and including a suicide pill, which involves deliberately bankrupting the company to either close it or place it in the hands of a court-appointed receiver.
A flip-in poison pill is a type of strategy in which existing shareholders, but not acquiring shareholders, are allowed to purchase shares in the target company at a discount. A flip-in poison pill takeover defense dilutes the value of the shares purchased by the acquiring company by flooding the market with new shares, while also allowing investors who purchase the new shares to profit instantaneously from the difference between the discounted purchase price and the market price.
A poison put is a takeover defense strategy in which the target company issues a bond that investors can redeem before its maturity date. A poison put is a type of poison pill provision designed to increase the cost a company will incur to acquire a target company. A flip-over poison pill is a type of defensive strategy that enables shareholders to buy shares in the acquiring company at a deeply discounted price if a hostile takeover bid is successful.
A dead hand provision, also known as a dead hand poison pill, is a special type of anti-takeover defense, in which the stock holdings of the bidder are massively diluted by shares being issued to every shareholder except them.
Shark repellent is a slang term for any one of some measures taken by a company to fend off an unwanted or hostile takeover attempt. In many cases, a company will make special amendments to its charter or bylaws that become active only when a takeover attempt is announced or presented to shareholders with the goal of making the takeover less attractive or profitable to the acquisitive firm. It is also known as a "porcupine provision."