Lady Macbeth Strategy (Hostile Takeover) - Explained
What is a Lady Macbeth Strategy?
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What is a Lady Macbeth Strategy?
Lady Macbeth strategy refers to a corporate takeover scheme where a third party acts as a white knight in order to gain trust, but eventually turns around, joining with the enemy in a hostile takeover bid. In secret, the hostile bidder and presumed white knight to the target company would conspire to accomplish their task of acquiring a company which is striving to resist the attempt.
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How Does a Lady Macbeth Strategy Work?
Lady Macbeth being one of Shakespeare's most dreaded and ambitious characters, devises a cunning strategy for her husband, the Scottish general, to kill the king of Scotland, Duncan. Her scheme's success lies in her deceitful ability to appear virtuous and noble, and thus secure Duncan's trust in the false loyalty of Macbeth. The white knight defense is a takeover defense which a company is capable of deploying in a hostile bid scenario. Other common ways of blocking or deterring unsolicited advances include poison pill adoption (shareholder rights plan), employee stock ownership plan (ESOP) adoption, creation of a different class of voting shares, staggering the Board of Directors' election among others. Supposing a company seeks out a white knight, it is mandatory that it treats the savior well, offering high incentives for his chivalry. For instance, the white knight might be permitted to pay a lower premium to take charge of the company that otherwise will be needed under competitive bid conditions.
Example of Lady Macbeth Strategy
No good modern-day instance of Lady Macbeth strategy exists. Hostile takeover bids take place only occasionally and it' still rare for a white knight to be involved in the plot. Furthermore, even if a targeted company searched for a white knight, it usually would be fully knowledgeable of this third party to be confident of it working cooperatively with the besieged company as against betraying it.
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