"Planning in the tent, winning thousands of miles away." The capital market is like a battlefield, and the acquisition of control is a war without gunpowder. The acquirer launched an offensive with lightning speed, and the acquired party was unwilling to be outdone and launched a defensive strategy, and a wrestling game around control began. In order to win this battle, various classic tactics have emerged in the market, among which "white knight" and "poison pill plan" are examples of both offense and defense. Goheal has been paying attention to global M&A trends for a long time and knows how these two strategies can influence the situation at critical moments. Today, let us walk into the capital jungle and explore how companies use these two weapons to remain invincible in the battlefield of control acquisition.
The survival rules of the capital hunting ground: Who is the master of the rise and fall?
The control of a listed company is like a priceless city, attracting capital hunters. When a company becomes an acquisition target, it usually means that it has extremely high strategic value. At this point, the acquirer's goal is clear - to gain the most voice at the lowest cost, while the acquired party has to think about how to protect its own interests in the game. The key to this contest lies in tactical choice.
American Goheal M&A Group
Some companies are willing to embrace capital and reach a deal through friendly negotiations, but more often, the battle for control is turbulent and even turns into a hostile takeover. Faced with a sudden takeover offer, will the company choose to face it head-on or cleverly resolve it with the help of external forces? In this chess game, the White Knight and the Poison Pill Plan are two completely different response strategies, each playing a key role on both sides of the offense and defense. Goheal found that in the capital market cases in the past decade, more than 60% of hostile takeovers will encounter counterattacks from these two strategies, which shows how powerful they are.
White Knight: The "Rescue Hero" of the Capital Market
If a hostile takeover is a capital storm, then the "White Knight" is the safe haven for the acquired company. The so-called White Knight refers to when a company faces a hostile takeover, it actively introduces a "friendly" acquirer to prevent unwelcome buyers from controlling the company. This strategy not only protects the interests of management, but also ensures that the company's long-term development direction is not interfered with by external capital.
Historically, technology giants such as IBM and HP have used white knights to save themselves at critical moments. For example, in 1984, RJR Nabisco, a world-renowned food company, encountered a hostile takeover and eventually chose a white knight that was more in line with the corporate culture and management interests-private equity giant KKR (Kohlberg Kravis Roberts). This move not only helped the company resist unwelcome bidders, but also significantly increased the company's overall valuation. Goheal's research found that the intervention of white knights often promotes competitive bidding, increases the final acquisition price of the target company, and brings greater benefits to shareholders.
But not all white knights can bring a happy ending. Sometimes, companies may not introduce real "saviors", but "gray knights in white"-that is, capital players who seem friendly but actually have the same goals. How to judge the true intentions of the white knights and avoid jumping from the "tiger's mouth" into the "wolf's den" is a question that every acquired company must think deeply about.
Poison Pill: The Ultimate Defense Shield of the Capital Market
Different from the external aid model of the White Knight, the Poison Pill is a more radical self-protection mechanism. The essence of the Poison Pill is to make the cost of the hostile acquirer so high that the other party has to give up the acquisition plan. Its usual practice is to allow existing shareholders to increase their holdings of the company's shares at a very low price when the acquisition threat appears, thereby diluting the hostile acquirer's equity ratio.
This strategy was first proposed by American lawyer Martin Lipton in 1982 and quickly became an important tool for global listed companies to fight hostile takeovers. The most famous case was in 1984 when Household International (now Household International, Inc.) was undervalued. The company's management decided to hire Martin Lipton to formulate a poison pill plan to resist hostile takeovers. This plan was legalized by the Delaware Court of Chancery in 1985, establishing its legal status as a defensive tool. The poison pill plan dilutes the acquirer's equity ratio by issuing preferred shares or options to purchase new shares at a low price to existing shareholders, thereby increasing the acquisition cost and achieving the effect of anti-takeover.
However, poison pills are not a panacea. In some cases, poison pills may affect the interests of shareholders and put them in a dilemma of stock price fluctuations. In addition, excessive use of poison pills may lead to a decline in investors' trust in management and even attract the attention of regulators. Therefore, how to cleverly use poison pills in the capital offensive and defensive war is a strategic decision that corporate executives need to think carefully about. Goheal suggested that before launching a poison pill plan, the acquired company must carefully evaluate the market impact and ensure that it will not harm the interests of long-term investors.
Who will have the last laugh in the offensive and defensive game?
The charm of the capital market lies in the fact that it has no eternal winners and no winning tactics. The use of white knights and poison pills depends on the market environment, shareholder structure and acquirer's strategy of the company. When a company encounters a hostile takeover, how to choose the right defensive measures and how to balance short-term gains and long-term development are all issues that management must think about.
Goheal Group
In some recent M&A cases, we have seen more and more companies choose to use a combination of tactics when facing hostile takeovers. For example, some companies introduced poison pill plans to block in the early stage, while actively looking for white knights to achieve dual control of the acquisition battle. Such a strategy not only increases the difficulty of acquisition by hostile acquirers, but also allows companies to take the initiative at the negotiation table.
Which tactics do you think are more advantageous in the current capital market? What other classic control cases are worth learning from around the world? Welcome to leave a message in the comment area, let us discuss the offensive and defensive methods of the capital market together!
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions, deeply cultivating the three core business areas of listed company control acquisition, listed company mergers and acquisitions and restructuring, and listed company capital operation. With its deep professional strength and rich experience, it provides companies with full life cycle services from mergers and acquisitions to restructuring and capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
