Todd Lovejoy, co-founder of TAL Management Services, has worked as a senior executive and consultant within the aerospace, medical, telecommunications, and consumer products industries for more than two decades. Over the course of his career, Todd Lovejoy has successfully driven growth and revenue at various companies and has defended a hostile takeover.
Companies can employ several different strategies to repel a hostile takeover. These methods of defense, collectively known as “shark repellent,” may be undertaken either periodically or continuously, and typically focus on making the acquisition of a company unappealing or challenging.
In most cases, shark repellent benefits a company’s management more than its stockholders. In fact, depending on the specific shark repellent used, shareholders may be negatively affected. For this reason, companies must be careful about choosing the right option for their situation.
Common examples of shark repellent include the golden parachute, dual-class stock, and supermajority. The golden parachute is a provision within the contract for the CEO, according to which the CEO receives a large bonus of stock or cash if the company is acquired. This makes a hostile takeover much more expensive, and thus less attractive.
Meanwhile, dual-class stock allows owners to retain voting stock while issuing non-voting stock to the public, and the supermajority defense involves purchasing enough stock that shareholders maintain a controlling interest.
