Jonestown Defense – Definition

Cite this article as:"Jonestown Defense – Definition," in The Business Professor, updated July 31, 2019, last accessed August 8, 2020, https://thebusinessprofessor.com/lesson/jonestown-defense-definition/.

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Jonestown Defense Definition

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.

A Little More on What is the Jonestown Defense

Jonestone 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 sucide 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.

References for “Jonestown Defense

 

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