The poison pill is a defensive tactic used by listed companies to deter activist investors or acquirers from creating large blocks of shares or staging takeovers without the consent of the board of directors and without paying a premium to all shareholders.
Poison pills determine the maximum share a shareholder can accumulate and dilute the assets of those who exceed the limit by issuing additional shares at a significant discount or free of charge to other shareholders.
Since poison pills can strengthen the position of company managers and boards of directors, companies must be able to demonstrate that they are an adequate response to a real threat.
Investors who fail to convince the company to drop their poison pill still have the option to convince shareholders to change the board of directors.
Acquisition premium is the difference between the estimated real value of a company and the actual price paid for its acquisition in an M&A transaction.
Performance Based Management (ABM) is a means of analyzing a company’s profitability by looking at every aspect of its business to determine its strengths and weaknesses.
Back integration is when a company expands its role to perform tasks that were previously performed by enterprises located higher up in the supply chain.
Share capital is the number of ordinary and preferred shares that the company has the right to issue and which are accounted for on the balance sheet as part of share capital.
As a result of the spin-off, the parent company sells a portion of its shares in its subsidiary to the public through an initial public offering (IPO), effectively turning the subsidiary into a stand-alone company.