Defense to Hostile Takeover – Asset or Liability Tactics
⁃ Legal Lockups – The corporation may be able to halt or delay the acquisition by making it less lucrative to the acquirer or making it illegal under existing law.
⁃ Asset Restructuring – The corporation may be able to acquire assets that the acquirer does not want or that will create antitrust problems. Alternatively, the corporation could sell valuable assets that the acquirer desires, thus making the acquisition less valuable.
⁃ Example: ABC Corp sells valuable assets to a friendly, third party. If the acquirer is doing so in hopes of creating value through a strategic acquisition of corporate assets, the sale of these assets may reduce the strategic value of the firm for the acquirer.
⁃ Litigation – The corporation may seek a legal action through the FTC or SEC alleging that a merger or takeover violates antitrust or securities laws.
⁃ Example: ABC Corp purchases a competitor of the acquiring firm. If the acquirer effectively gains control over ABC Corp, the Federal Government may review the acquisition to make certain it does not violate antitrust law. If the acquisition results in a concentration of market power in the acquirer, the government may block the acquisition.