how to avoid or fight off an unsolicited bid
a vulnerable company may have several mechanisms with which to defend itself if it becomes the target of an unsolicited offer or ultimately a hostile takeover first it can reject the offer outright if that doesn t work there is the people poison pill defense where the management of the target company threatens to resign in the event of a takeover this would force the acquirer to assemble a new management team if the acquisition was successful which may be costly another defense mechanism is the poison pill where shareholders buy more company stock at a discount thereby raising the number of shares the bidder will have to purchase to realize the unsolicited bid another way to avoid being a target is to set up an employee stock ownership plan which would allow employees to buy shares in the company thereby giving them the ability to vote alongside management about important decisions involving the company example of an unsolicited bidcompany abc an african oil company makes an unsolicited offer to purchase another african oil company company def company abc believes that by purchasing def it will remove a competitor grow its business by expanding its market share and absorb the cutting edge technology that def has created abc offers 1 billion in a proposed all cash deal however def believes the price is too low and turns the deal down abc comes back with another unsolicited bid in the amount of 1 4 billion def ponders this deal until company xyz a saudi oil company makes an unsolicited bid of 2 billion this price is considered high by market analysts and is too expensive for company abc to compete with xyz has significant reserves of cash on hand and covets def s technology the offer is accepted by def and the merger goes through with xyz 