Jonestown Defense (Hostile Takeover) - Explained
What is a Jonestown Defense?
Written by Jason Gordon
Updated at September 23rd, 2021
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What is a Jonestown Defense?
The Jonestown Defense is a strategy or mechanism used by target companies to prevent hostile takeovers or acquisition by acquiring companies. The Jonestown defense is an extreme defense tactic in that the target company kills (ruins) itself to foil the acquisition plan. Jonestown defense is otherwise called a suicide pill, it is an extreme form of poison pill. The target company dies rather than it being acquired through hostile takeovers. When the target company perceives a hostile takeover, it foils this attempt by completely ruining itself.
How does the Jonestown Defense Work?
Jonestown defense as a strategy against hostile takeover was developed in 1978. This was the period when the C used the tactic as a means of foiling a takeover attempt. The People's Temple was a religious cult group in Guyana led by Jim Jones, the members committed mass suicide rather than being overpowered. Target companies used diverse means to prevent hostile takeovers. The extreme ones are regarded as Jonestown defense. For example, a target company can dilute the holdings of shareholders of the acquiring company to foil the takeover attempt. The company could also take on excess debt so as to g bankrupt, making it impossible to be acquired.
Related Concepts
- Hostile Takeover
- Power Struggles in Corporate Governance
- Tender Offer
- Proxy Contest
- White Knight and Pac Man Defenses
- Incentivizing Acquirer Defense
- Asset and Liability Defenses
- Shark Repellant Defense
- Poison Pill Defense
- Gray Knight Defense
- Macaroni Defense
- Kamikaze Defense