Background Note | HBS Case Collection | October 2007 (Revised December 2008)

Evaluating M&A Deals: How Poison Pills Work

by Carliss Y. Baldwin

Abstract

The poison pill defense against hostile takeovers was invented in 1982 by Martin Lipton, of Wachtell, Lipton, Rosen and Katz. Pills are considered the most effective of all the normal defenses against a hostile bidder. Describes the two basic types of poison pills (flip-ins and flip-overs), and explains how the form of a tender offer changes the impact of a pill on the bidder. Also describes how bidders can set up tender offers to avoid poison pills.

Keywords: Negotiation Deal; Mergers and Acquisitions;

Citation:

Baldwin, Carliss Y. "Evaluating M&A Deals: How Poison Pills Work." Harvard Business School Background Note 208-061, October 2007. (Revised December 2008.)