The world of corporate takeovers has developed some colorful lingo – often literally colorful. We’ll look at some of it this week. Our first example is, like yesterday’s word, a will be a “gold” term.
golden parachute – an employment contract providing that a key executive will be given lucrative severance benefits if the company is taken over
– Bryan Burrough and John Helyar, Barbarians at the Gate: The Fall of RJR Nabisco
What tactics can a company use to resist an unwanted attempt to take it over? One tactic is to think “eat or be eaten,” and attempt to gobble up the attacker. That strategy is named for a voracious monster.
pac man defense – a stratagem, to prevent a hostile takeover, by which the target company tries to acquire the bidder
. . .In the course of this, Agee bailed and took an expensive parachute with him. It was, at that point, the most expensive golden parachute ever: $4 million.
– Business Week, How Golden Parachutes Unfurled,, Dec. 12, 2005
To stagger is to astound or overwhelm, as with shock. But when a company’s board of directors is “staggered”, it isn't in shock; it is using a tactic to remain in control.
staggered board – a board (of directors) whose members’ terms are overlapping, not coincident, so that only some directors (not all) are elected in any single election
– New York Times, Feb. 14, 2007 (ellipses omitted)
Another “color”ful term, combining green with blackmail.
greenmail – the practice of buying enough stock to threaten a hostile takeover, so that the company will pay you a premium price to buy the stock back and get you to go away (also, the money paid to you)
. . .Texaco paid in 1984 to fend off a takeover, while General Motors bought out Ross Perot's stake in 1986. The investors each reaped more than $100 million in profits.
. . .But thanks to tightened board rules, a post-Sarbanes Oxley pro-shareholder sentiment, and in several cases, state laws outlawing greenmail, raiders now have to build a broad shareholder consensus to get their goals accomplished.
– Forbes, Feb. 21, 2006 (ellipses omitted)
– eWeek, May 27, 2004
Richman shrugged. “If you have a strong case, take him to trial.” “Yes,” Casey said. ”But trials are very expensive, and the publicity doesn’t do us any good. It’s cheaper to settle, and just add the cost of his greenmail to the price of our aircraft."
– Michael Crichton, Airframe
poison pill – an arrangement that an attempted takeover will trigger certain events – the events being ones that make the takeover less attractive. (The arrangement is made as an anti-takeover tactic.) E.g., issuance of preferred stock that is redeemable at a premium in the event of takeover.
The recent Microsoft/Yahoo confrontation provides an example.
– Yahoo’s poison pill may fail to repel Microsoft, Feb. 13, 2008
A colorful term to end this theme.
white knight – a friendly acquirer, sought out by a target firm to rescue it from an unwelcome acquirer
– Forbes, June 20, 2007
[Note: Alcan was Alcoa’s Canadian subsidiary until 1951, when regulators forced a separation. As of 2007 the two were the largest aluminum producers.]