Takeovers, Anti-Takeover Provisions, and Corporate Governance – Key Terms

Vocabulary flashcards covering takeover concepts, anti-takeover defenses, executive compensation incentives, and governance terminology from the lecture.

Takeover

An attempt by an outside party to gain control of a company, often resisted by the target; distinguishes takeover activity from a negotiated M&A deal.

M&A

Mergers and Acquisitions; deals where two firms combine or one buys another through an agreement.

Hostile takeover

An acquisition attempt that is opposed by the target company's management and/or shareholders.

Greenmail

A tactic where the target buys back the acquirer’s stake at a premium to stop a takeover, often harming other shareholders.

Golden parachute

A large severance package promised to a CEO if the company is taken over, designed to retain or compensate leadership after a change in control.

Poison pill

An anti-takeover provision that lets the target issue new shares at a discount to dilute the potential acquirer and deter the takeover.

Poison pill trigger

The ownership threshold (e.g., 12–15%) at which the poison pill is activated.

Overpaying for takeovers

Paying more than a target is worth, which can deplete the acquirer’s resources and destroy shareholder value.

Synergy

The expected value increase from combining two firms, often cited as a justification for mergers and acquisitions.

Stock options

A compensation instrument giving the right to buy company stock at a set exercise price, usually with vesting.

Exercise price

The fixed price at which an option holder can purchase the underlying stock when exercising a stock option.

Vesting period

The waiting period before stock options can be exercised.

Backdating

The illegal practice of dating an option grant earlier to lower the exercise price and increase the option’s value.

Class B shares

A high-vote class of shares (often with many votes per share) used to maintain founder control; may convert to Class A under certain events.

Dual-class shares

A share structure with different voting rights across classes, enabling unequal control among shareholders.

Control company (Nasdaq context)

A company with concentrated voting power that may not be required to have a majority of independent directors.

Independent directors / board independence

Directors who are not affiliated with management and are expected to oversee governance impartially.

Common law vs civil law investor protection

A comparison of shareholder protections by legal tradition; common-law systems typically offer stronger protections and governance than civil-law systems.