Patterns and effectiveness of anti takeover policies used by firms

Abstract

In the current market scenario, we see a new trend evolving. There seem to be many firms which are intrinsically very strong but face poor market valuations due to the recessionary market conditions and poor performance in the markets in the recent times. As a result, many big and respectable firms have now become easy targets for takeovers and acquisitions. In such a scenario, it is worthwhile to see which anti takeover defenses are used by these firms to protect themselves against acquisitions. Additionally, how effective are these strategies in serving the required purpose and what are the long term implications of these strategies on the firm value and the investor value is worth looking at. Moreover, it is possible that different kinds of companies (public vs private, professionally owned vs family owned, leveraged vs unleveraged companies etc.) might employ different kinds of anti takeover strategies. It is again worthwhile to ascertain which defense strategy is best suited for which kind of company. In this report I would be looking at various takeover defense mechanisms used by firms in the Indian and international context and the effectiveness of these defenses in light of hostile and friendly takeover bids. Finally, after covering the major defenses, I will use a framework to fit the various defenses based on 2 parameters of change in control and increase in cost.