What are Asset and Liability Tactics as Defenses to Hostile Takeovers?

Examples of such tactics include Legal Lockups, Asset, Restructuring, and Engaging Litigation.

Next Article: Takeover Defense - Pac Man & White Knight Back to: CORPORATE GOVERNANCE

What are 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.

What is 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.

What is 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.

Related Topics

• Corporate Governance Law (Intro)
• What is Business Governance?
• Berle-Means Thesis 
• Corporate Governance Rating Definition
• Who are the members of a corporation?
• Corporate Charter
• Shareholder Register
• Common Stock
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• Outstanding Shares
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• What is a closely-held corporation?
• Close Corporation Plan Definition
• What is a Private Company vs a Public Company?
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• What is the role & rights of Shareholders in the corporation?
  
• Shareholder Democracy Definition
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• Cumulative Voting
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• Board Decision Making
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• What is the role of the Board of Directors?
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• Chairman of the Board
• CEO as Chairman of the Board
• Inside Director
  
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• Outside Director or Non-Executive Director Definition
• Independent Outside Director
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• What is the Business Judgment Rule?
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• What standards govern manager actions?
• Chief Executive Officer (CEO)
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• Chief Information Officer (CIO)
• Chief Investment Officer (CIO)
• Chief Legal Officer
• Chief Operating Officer
• Chief Risk Officer
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• What are the primary state and federal corporate governance laws?
• What is the role of the state in corporate governance?
• What is the role of Securities Laws in corporate governance?
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