Buzzword of the Week: Shark Repellent

When I found my buzzword Killer Bees on Investopedia a week or so ago, related to measures a company can use to fend over a hostile takeover bid, I also found another animal metaphor for another set of measures: Shark Repellent.

Shark Repellent is a slang term for any one of a number of measures taken by a company to fend off an unwanted or hostile takeover attempt. In many cases, a company will make special amendments to its charter or bylaws that become active only when a takeover attempt is announced or presented to shareholders with the goal of making the takeover less attractive or profitable to the acquisitive firm.

Most companies want to decide their own fates in the marketplace, so when the sharks attack, shark repellent can send the predator off to look for a less feisty target.

While the concept is a noble one, many shark repellent measures are not in the best interests of shareholders, as the actions may damage the company’s financial position and interfere with management’s ability to focus on critical business objectives. Some examples of shark repellents are poison pills, scorched earth policies, golden parachutes, and safe harbor strategies.

 

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