Takeover and Takeover Takeover and Takeover DefensesDefenses

Types of TakeoverTypes of Takeover

Types of TakeoversTypes of Takeovers

Friendly, Hostile & Bailout Friendly, Hostile & Bailout TakeoversTakeovers

Takeover can be either Takeover can be either “Friendly”“Friendly” or or “Hostile”“Hostile”.. In case of a In case of a FFriendly takeoverriendly takeover, the promoters / management of the target , the promoters / management of the target

company are also, in principle, agreeable to be taken over by the acquirer company are also, in principle, agreeable to be taken over by the acquirer and are willing to peacefully cede control over the target company to the and are willing to peacefully cede control over the target company to the acquirer. This happens when the entire promoter group is willing to exit..acquirer. This happens when the entire promoter group is willing to exit..

On the other hand, sometimes promoter group receives an offer from a On the other hand, sometimes promoter group receives an offer from a perspective acquirer whom they do not want to sell out to. It may even perspective acquirer whom they do not want to sell out to. It may even occur that some of the entities in the promoter group are against the sell occur that some of the entities in the promoter group are against the sell out. On these occasions the sellout takeover battle follows. This is known out. On these occasions the sellout takeover battle follows. This is known as as HHostile takeoverostile takeover

Bailout Takeover Bailout Takeover involves takeover of a sick company by a financially involves takeover of a sick company by a financially sound, rich company as per Sick Industrial Companies Act (1985)sound, rich company as per Sick Industrial Companies Act (1985)

Types of Friendly Takeover Types of Friendly Takeover SituationsSituations

(i) (i) The target company may be open to only one specific acquirerThe target company may be open to only one specific acquirer , if , if the latter agrees to the price and other conditions of takeover such as non-the latter agrees to the price and other conditions of takeover such as non-retrenchment of employees, post acquisition role of the existing retrenchment of employees, post acquisition role of the existing promoters / management, non-compete fees, continuation of certain promoters / management, non-compete fees, continuation of certain businesses etc.businesses etc.

(ii) In the second case, (ii) In the second case, the promoters and management of the target the promoters and management of the target company may be open to any acquirer who offers them overall the company may be open to any acquirer who offers them overall the best deal.best deal.

(iii) In the third case, the promoters / management of the (iii) In the third case, the promoters / management of the target company target company may have a negative list of acquirers in mind that they do not want to may have a negative list of acquirers in mind that they do not want to sell out to. Outside this negative list of acquirers in mind, they are sell out to. Outside this negative list of acquirers in mind, they are open to anyone who offers them the best deal. open to anyone who offers them the best deal.

Benefits of a Friendly TakeoverBenefits of a Friendly Takeover Friendly takeover is beneficial to both, the acquirer and the existing Friendly takeover is beneficial to both, the acquirer and the existing

promoters.promoters. For the acquirer For the acquirer the benefits are: (i) The target company shares the the benefits are: (i) The target company shares the

critical information required by the acquirer to carry out valuation of critical information required by the acquirer to carry out valuation of the target company. (ii) It facilitates due diligence by the acquirer. (iii) the target company. (ii) It facilitates due diligence by the acquirer. (iii) It cooperates in carrying out the legal formalities.It cooperates in carrying out the legal formalities.

For the target company For the target company and its promoters the benefits are: (i) chances and its promoters the benefits are: (i) chances are higher that an acquirer would offer better price for the target are higher that an acquirer would offer better price for the target company (ii) the acquirer may allow the promoters and management company (ii) the acquirer may allow the promoters and management of the target company to continue and have important roles post- of the target company to continue and have important roles post- acquisitionacquisition

Example of Friendly and Hostile Example of Friendly and Hostile TakeoversTakeovers

In the case of Tata Steel’s acquisition of Corus, the later was also In the case of Tata Steel’s acquisition of Corus, the later was also looking for a prospective acquirer, who was a low cost producer of looking for a prospective acquirer, who was a low cost producer of steel, was close to it culturally and who would not retrench employees. steel, was close to it culturally and who would not retrench employees. Hence they were willing to sell out to Tata Steel. Corus was also open Hence they were willing to sell out to Tata Steel. Corus was also open to being acquired by a Brazilian company CSN. Therefore, there was a to being acquired by a Brazilian company CSN. Therefore, there was a bidding war between the two. However, the acquisition was still bidding war between the two. However, the acquisition was still friendlyfriendly as Corus was willing to sell out to Tata Steel. as Corus was willing to sell out to Tata Steel.

On the other hand, in the case of Mittal Steel’s acquisition of Arcelor, On the other hand, in the case of Mittal Steel’s acquisition of Arcelor, the management of Arcelor was strongly opposed to takeover by the management of Arcelor was strongly opposed to takeover by Mittal Steel, whom they sneered at as a company promoted by an Mittal Steel, whom they sneered at as a company promoted by an Indian. Hence Mittal has to resort to a Indian. Hence Mittal has to resort to a hostilehostile takeover route. takeover route.

Tactics Used by Acquirer for Tactics Used by Acquirer for Taking over a target companyTaking over a target company

Tactics Used by AcquirerTactics Used by Acquirer

Casual PassCasual Pass Open Market Purchases and Street SweepsOpen Market Purchases and Street Sweeps Dawn RaidDawn Raid Bear HugBear Hug Saturday Night SpecialSaturday Night Special Proxy FightsProxy Fights Tender OfferTender Offer

Casual PassCasual Pass

Before initiating a takeover initiative, the bidder may attempt Before initiating a takeover initiative, the bidder may attempt some informal overture to the management of the target. This some informal overture to the management of the target. This is sometimes referred to as casual pass. It may come from a is sometimes referred to as casual pass. It may come from a member of the bidder’s management or from one of its member of the bidder’s management or from one of its representatives , such as its investment banker. A casual pass representatives , such as its investment banker. A casual pass may be used if the bidder is unsure of the target’s response.may be used if the bidder is unsure of the target’s response.

Open Market Purchases and Street Open Market Purchases and Street SweepsSweeps

A bidder may accumulate stocks in the target before making a A bidder may accumulate stocks in the target before making a tender offer. The purchaser usually tries to keep these initial tender offer. The purchaser usually tries to keep these initial purchases secret to put as little upward pressure as possible on purchases secret to put as little upward pressure as possible on the target’s stock price. To do so, the acquisitions are often the target’s stock price. To do so, the acquisitions are often made through various shell corporations and partnerships made through various shell corporations and partnerships whose names do not convey the true identity of the ultimate whose names do not convey the true identity of the ultimate purchaser.purchaser.

Upon reaching the 5% threshold, the purchaser has 10 days Upon reaching the 5% threshold, the purchaser has 10 days before it is necessary to make a public disclosure. This time before it is necessary to make a public disclosure. This time may be used by the bidder to augment its stockholding. The may be used by the bidder to augment its stockholding. The larger the purchaser’s position in the target, the more leverage larger the purchaser’s position in the target, the more leverage the firm has over the target. the firm has over the target.

Dawn RaidDawn Raid

In this tactics, the broker acting on behalf of the acquirer In this tactics, the broker acting on behalf of the acquirer swoop down on stock exchange (s) at the time of its opening swoop down on stock exchange (s) at the time of its opening and buy all available shares before the target wakes up.and buy all available shares before the target wakes up.

This tactics to succeed, the scrip, has to be highly liquid.This tactics to succeed, the scrip, has to be highly liquid. Even if the target does not wake up, investors would and the Even if the target does not wake up, investors would and the

price is likely to go up.price is likely to go up. Indian takeover code prohibit the acquirer, along with the Indian takeover code prohibit the acquirer, along with the

persons acting in concert from acquiring 15% or more shares persons acting in concert from acquiring 15% or more shares or voting capital (including the shares and voting capital or voting capital (including the shares and voting capital already held) of the target company without making an open already held) of the target company without making an open offer.offer.

Bear HugBear Hug

The acquirer makes a very attractive tender offer to the The acquirer makes a very attractive tender offer to the management of the target company for the latter’s management of the target company for the latter’s shareholders and asks them to consider the same offer in the shareholders and asks them to consider the same offer in the interest of the shareholders. Though such offer of the acquirer interest of the shareholders. Though such offer of the acquirer is unsolicited, the board of the target company is bound to is unsolicited, the board of the target company is bound to consider it impartially on account of its fiduciary capacity in consider it impartially on account of its fiduciary capacity in protecting public shareholders’ interests. Further if the offer is protecting public shareholders’ interests. Further if the offer is really good, the board cannot reject it just on frivolous ground really good, the board cannot reject it just on frivolous ground to protect the interest of the promoters of the target. Chances to protect the interest of the promoters of the target. Chances are that the public shareholders and particularly institutional are that the public shareholders and particularly institutional shareholders would favorably respond.shareholders would favorably respond.

Saturday Night SpecialSaturday Night Special

This is the same tactics as bear hug, but made on the Friday or This is the same tactics as bear hug, but made on the Friday or Saturday night (last working day of a week) asking for a Saturday night (last working day of a week) asking for a decision by Monday (first working day of the next week). The decision by Monday (first working day of the next week). The idea behind this is to give very little time to the promoters / idea behind this is to give very little time to the promoters / board of the target company to set up their defenses. This is board of the target company to set up their defenses. This is also called “Godfather Offer”.also called “Godfather Offer”.

Proxy FightProxy Fight

In this tactics, the acquirer convinces majority (in value) In this tactics, the acquirer convinces majority (in value) shareholders to issue proxy rights in his favor, so that he can shareholders to issue proxy rights in his favor, so that he can remove the existing directors from the board of the target remove the existing directors from the board of the target company and appoint his own nominees. company and appoint his own nominees.

However, this method in which the control is sought without However, this method in which the control is sought without acquisition may not be sustainable since every time the acquisition may not be sustainable since every time the acquirer will have to keep on acquiring proxies from acquirer will have to keep on acquiring proxies from geographically scattered shareholders. Also, such removal or geographically scattered shareholders. Also, such removal or appointment of majority directors will be treated as an appointment of majority directors will be treated as an acquisition of control over the target company requiring the acquisition of control over the target company requiring the acquirer to make an open offer. Hence proxy fight can not be a acquirer to make an open offer. Hence proxy fight can not be a sustainable tactics for hostile acquisition.sustainable tactics for hostile acquisition.

Tender OfferTender Offer

A company usually resorts to tender offer when a friendly A company usually resorts to tender offer when a friendly negotiated transaction does not appear to be a viable negotiated transaction does not appear to be a viable alternative. In using tender offer, the bidder may be able to alternative. In using tender offer, the bidder may be able to circumvent management and obtain control even when the circumvent management and obtain control even when the managers oppose the takeover. The costs associated with a managers oppose the takeover. The costs associated with a tender offer such as legal filing fees and publication costs, tender offer such as legal filing fees and publication costs, make the tender offer a more expensive alternative than a make the tender offer a more expensive alternative than a negotiated deal. The initiation of a tender offer usually means negotiated deal. The initiation of a tender offer usually means that the company will be taken over although not necessarily that the company will be taken over although not necessarily by the firm that initiated the tender offer. Another firm may by the firm that initiated the tender offer. Another firm may enter the bidding process and seek to engage in the bidding enter the bidding process and seek to engage in the bidding contest. This may in turn increase the cost of purchase. contest. This may in turn increase the cost of purchase.

Defense Tactics Used by the Defense Tactics Used by the Target Company to avoid Target Company to avoid

takeover effortstakeover efforts

Defence Tactics used by target Defence Tactics used by target CompanyCompany

Crown JewelsCrown Jewels Poison PillPoison Pill People PillPeople Pill Scorched EarthScorched Earth Pac manPac man Green MailGreen Mail White NightsWhite Nights Grey NightsGrey Nights Golden ParachutesGolden Parachutes White Square DefenceWhite Square Defence

Crown JewelsCrown Jewels

The target company sells its highly profitable or attractive The target company sells its highly profitable or attractive business / division business / division (called Crown Jewels) (called Crown Jewels) to make the takeover to make the takeover bid less attractive to the raider.bid less attractive to the raider.

Poison PillPoison Pill

This is a strategy which upon a successful acquisition by the This is a strategy which upon a successful acquisition by the acquirer, would create a negative financial result and value acquirer, would create a negative financial result and value reduction for the acquirer.reduction for the acquirer.

(i) The target company may issue rights / warrants to the (i) The target company may issue rights / warrants to the existing shareholders entitling them to acquire large number of existing shareholders entitling them to acquire large number of shares at discount in the event of acquirer’s stake reaches a shares at discount in the event of acquirer’s stake reaches a certain level (say 30%). This is called as certain level (say 30%). This is called as “Shareholders’ “Shareholders’ Rights Plan” or “Flip Over”Rights Plan” or “Flip Over”

The target company may add to its charter a provision that The target company may add to its charter a provision that gives the current shareholders a right to sell their shares to the gives the current shareholders a right to sell their shares to the acquirer at an increased price ( say 100% above last two acquirer at an increased price ( say 100% above last two week’s average price) week’s average price)

Poison PillPoison Pill

The target company may borrow large long-term funds (bullet The target company may borrow large long-term funds (bullet loans repayable at the end of the term) from Banks / Financial loans repayable at the end of the term) from Banks / Financial Institutions or other lenders, but would be repayable Institutions or other lenders, but would be repayable immediately with a high premium in case of a successful immediately with a high premium in case of a successful takeover bid.takeover bid.

The target company may borrow to pay a huge dividend to The target company may borrow to pay a huge dividend to existing share holders existing share holders (Leveraged Cash out).(Leveraged Cash out).

The target company may buy back its shares using borrowed The target company may buy back its shares using borrowed funds. This will have a double effect: (i) Increasing Promoter’s funds. This will have a double effect: (i) Increasing Promoter’s stake (ii) Negative effect on cash flows (debt repayment). This stake (ii) Negative effect on cash flows (debt repayment). This is known as is known as “Leveraged Recap” or “Poison Put”“Leveraged Recap” or “Poison Put”

Entitling voting rights to Preference Stock holders.Entitling voting rights to Preference Stock holders.

People PillPeople Pill

In this tactics, the current management team, key employees In this tactics, the current management team, key employees threaten to quit en masse in the event of a hostile takeover. threaten to quit en masse in the event of a hostile takeover. This can be an effective defense in certain specific cases and This can be an effective defense in certain specific cases and situations.situations.

Scorched EarthScorched Earth

Scorched earth is originally a military tactics that involves Scorched earth is originally a military tactics that involves destroying anything that might be useful to the enemy while destroying anything that might be useful to the enemy while retreating from an area. As a takeover defense, it virtually retreating from an area. As a takeover defense, it virtually destroys a company while it is being taken over or when it is destroys a company while it is being taken over or when it is likely to face a takeover threat. This could be achieved either likely to face a takeover threat. This could be achieved either through extreme form of poison pill or extreme form of crown through extreme form of poison pill or extreme form of crown jewel tactics or through stripping of significant assets. In jewel tactics or through stripping of significant assets. In India, this tactics can be used prior to an acquirer making India, this tactics can be used prior to an acquirer making public offer and making a public announcement thereof. public offer and making a public announcement thereof. However, once such announcement is made, the takeover However, once such announcement is made, the takeover regulations do not permit asset stripping, etc, till the open offer regulations do not permit asset stripping, etc, till the open offer is closed. is closed.

PacmanPacman

The target company or its promoters start acquiring sizeable The target company or its promoters start acquiring sizeable holding in the acquirer / raider company, threatening to holding in the acquirer / raider company, threatening to acquire the raider itself. This makes the acquirer run for cover acquire the raider itself. This makes the acquirer run for cover and forces him to hammer out a truce. This tactic is possible in and forces him to hammer out a truce. This tactic is possible in India prior to the acquirer hitting the trigger for open offer and India prior to the acquirer hitting the trigger for open offer and making the public announcement thereof. Also the target making the public announcement thereof. Also the target company needs to take care that it does not trigger the open company needs to take care that it does not trigger the open offer for the acquirer’s companyoffer for the acquirer’s company

GreenmailGreenmail

The target company or the existing promoters arrange through The target company or the existing promoters arrange through friendly investors to accumulate large stock of its shares with a friendly investors to accumulate large stock of its shares with a view to raise its market price. This makes the takeover very view to raise its market price. This makes the takeover very expensive for the raider. In India this is possible; however, if it expensive for the raider. In India this is possible; however, if it is done in such a manner that the nexus between the existing is done in such a manner that the nexus between the existing promoters and friendly investors who are accumulating the promoters and friendly investors who are accumulating the stock is proved, it may trigger an open offer by the existing stock is proved, it may trigger an open offer by the existing promoters themselves. promoters themselves.

Sometimes the existing promoters of the target company agree Sometimes the existing promoters of the target company agree to buy back the shares being accumulated by the raider at a to buy back the shares being accumulated by the raider at a substantial premium. In return the raider agrees that neither he substantial premium. In return the raider agrees that neither he nor his associates shall acquire a sizeable stake in target for a nor his associates shall acquire a sizeable stake in target for a stipulated period. This is known as stipulated period. This is known as “Stand still Agreement”“Stand still Agreement”

White mailWhite mail

White mail is another takeover defense strategy wherein the White mail is another takeover defense strategy wherein the target company issues a large number of shares at a price quite target company issues a large number of shares at a price quite below the market price to a friendly party. This forces the below the market price to a friendly party. This forces the acquiring company to purchase these shares from the third acquiring company to purchase these shares from the third parties to complete the takeover. This discourages the takeover parties to complete the takeover. This discourages the takeover as it becomes more difficult and expensive as the raider has to as it becomes more difficult and expensive as the raider has to purchase shares from parties friendly to the target company. purchase shares from parties friendly to the target company. Once the takeover attempt is averted, the target company may Once the takeover attempt is averted, the target company may either buy back the issued shares or leave them floating in the either buy back the issued shares or leave them floating in the market.market.

Treasury StockTreasury Stock Treasury stocks are also known as reacquired stocks. These are stocks and Treasury stocks are also known as reacquired stocks. These are stocks and

shares bought back by the issuing company with the objective of reducing shares bought back by the issuing company with the objective of reducing the volume of outstanding stock in the open market. This strategy is the volume of outstanding stock in the open market. This strategy is adopted by companies to protect themselves against a takeover threat. It is adopted by companies to protect themselves against a takeover threat. It is also resorted to when the company feels that its shares are undervalued in also resorted to when the company feels that its shares are undervalued in the open market. The shares repurchased are either cancelled or held for the open market. The shares repurchased are either cancelled or held for reissue. If such shares are not cancelled they are known as Treasury Shares reissue. If such shares are not cancelled they are known as Treasury Shares or Treasury Stock. No dividend is paid against treasury stocks and these or Treasury Stock. No dividend is paid against treasury stocks and these stocks have no voting rights. Treasury stocks were issued during reverse stocks have no voting rights. Treasury stocks were issued during reverse merger of ICICI with ICICI Bank against the holding of ICICI , which merger of ICICI with ICICI Bank against the holding of ICICI , which were later sold at a premium. were later sold at a premium.

Shark RepellentShark Repellent

In this case, the target company makes special amendments to In this case, the target company makes special amendments to its bylaws that become active only when a takeover attempt is its bylaws that become active only when a takeover attempt is announced. The objective of these special amendments is to announced. The objective of these special amendments is to make the takeover less attractive to the acquirer. Shark make the takeover less attractive to the acquirer. Shark repellent is a repellent applied by deep sea divers to prevent repellent is a repellent applied by deep sea divers to prevent sharks from attacking them. In a takeover situation, the sharks from attacking them. In a takeover situation, the acquirer is a shark and the proposed amendments repel the acquirer is a shark and the proposed amendments repel the shark to prevent the attack. shark to prevent the attack.

White KnightWhite Knight

In this tactics, the target company or its existing promoters In this tactics, the target company or its existing promoters enlist the services of another company or group of investors to enlist the services of another company or group of investors to act as a white knight who actually takes over the target act as a white knight who actually takes over the target company, thereby foiling the bid of the raider and retaining the company, thereby foiling the bid of the raider and retaining the control of existing promoters. This is possible in India.control of existing promoters. This is possible in India.

White SquireWhite Squire

A white squire is similar to a white knight. The only difference A white squire is similar to a white knight. The only difference is that a white squire exercises a significant minority stake, as is that a white squire exercises a significant minority stake, as opposed to a majority stake. A white squire does not have any opposed to a majority stake. A white squire does not have any intention of getting involved in the takeover battle, but serves intention of getting involved in the takeover battle, but serves as a figurehead in defending the target in a hostile takeover. as a figurehead in defending the target in a hostile takeover. The white squire enjoys special voting rights for the equity The white squire enjoys special voting rights for the equity stake that it holds in the company.stake that it holds in the company.

Grey KnightGrey Knight

In this tactics, the services of a friendly company or a group of In this tactics, the services of a friendly company or a group of investors are engaged to acquire shares of the raider itself to investors are engaged to acquire shares of the raider itself to keep the raider busy defending himself and eventually force a keep the raider busy defending himself and eventually force a truce. This is also possible in India.truce. This is also possible in India.

Golden ParachuteGolden Parachute

In this, a contractual guarantee of a fairly large sum of In this, a contractual guarantee of a fairly large sum of compensation is issued to the top and / or senior executives compensation is issued to the top and / or senior executives of the target company whose services are likely to be of the target company whose services are likely to be terminated in case the takeover succeeds. However, this is terminated in case the takeover succeeds. However, this is actually not a tactics for defending the company from the actually not a tactics for defending the company from the takeover but to ensure that the existing top management is takeover but to ensure that the existing top management is well taken care of in case the takeover initiative becomes well taken care of in case the takeover initiative becomes successful.successful.

Killer BeesKiller Bees

Under this strategy, the target company employs firms or Under this strategy, the target company employs firms or individuals to fend off a takeover bid. The target company individuals to fend off a takeover bid. The target company wants to avert the takeover attempt and either is unable to do wants to avert the takeover attempt and either is unable to do so on its own or does not want to be seen doing so. Hence it so on its own or does not want to be seen doing so. Hence it follows this tactics.follows this tactics.

Benefits of TakeoversBenefits of Takeovers

The Acquirer increases its sales, market share and revenuesThe Acquirer increases its sales, market share and revenues The acquirer through takeover ventures into new business The acquirer through takeover ventures into new business

segments and marketssegments and markets It reduces competitionIt reduces competition Helps in achieving economies of scale and scopeHelps in achieving economies of scale and scope

Disadvantages of TakeoversDisadvantages of Takeovers

Reduces competitionReduces competition Results in job cutsResults in job cuts Conflict among managements and employees of acquirer and Conflict among managements and employees of acquirer and

targettarget Acquirer may face hidden threats and undisclosed liabilitiesAcquirer may face hidden threats and undisclosed liabilities

Oracle Held at Bay by Peoplesoft’s Oracle Held at Bay by Peoplesoft’s Poison PillPoison Pill

In June 2003, the second largest US software maker (behind Microsoft), In June 2003, the second largest US software maker (behind Microsoft), Oracle Corp., initiated a $7.7 billion hostile bid for rival and third largest, Oracle Corp., initiated a $7.7 billion hostile bid for rival and third largest, Peoplesoft Inc. Both firms market “back office” software that is used for Peoplesoft Inc. Both firms market “back office” software that is used for supply management as well as other accounting functions. Lawrence supply management as well as other accounting functions. Lawrence Ellison, Oracle’s very aggressive CEO, doggedly pursued Peoplesoft, Ellison, Oracle’s very aggressive CEO, doggedly pursued Peoplesoft, which brandished its powerful poison pill defense to keep Ellison at bay. which brandished its powerful poison pill defense to keep Ellison at bay. The takeover battle went on for approximately a year and a half; all the The takeover battle went on for approximately a year and a half; all the while Peoplesoft was able to prevent Oracle from completing the takeover while Peoplesoft was able to prevent Oracle from completing the takeover due to the strength of its poison pill. Peoplesoft's board rejected Oracle’s due to the strength of its poison pill. Peoplesoft's board rejected Oracle’s offer as inadequate and refused to remove the poison pill. Oracle then offer as inadequate and refused to remove the poison pill. Oracle then pursued litigation in Delaware to force Peoplesoft to dismantle the defense. pursued litigation in Delaware to force Peoplesoft to dismantle the defense. Over the course of the takeover contest, Oracle increased its offer from an Over the course of the takeover contest, Oracle increased its offer from an initial share offer price of $19 to $26 and then lowered it to $21 and then initial share offer price of $19 to $26 and then lowered it to $21 and then back up to $24. Peoplesoft also used a novel defense when it offered its back up to $24. Peoplesoft also used a novel defense when it offered its customers, in the event of a hostile takeover by Oracle, a rebatecustomers, in the event of a hostile takeover by Oracle, a rebate of up to of up to five times the license fee they paid for the Peoplesoft software. five times the license fee they paid for the Peoplesoft software.

Oracle Held at Bay by Peoplesoft’s Oracle Held at Bay by Peoplesoft’s Poison PillPoison Pill

Peoplesoft defended this defense by saying that the hostile bid made it Peoplesoft defended this defense by saying that the hostile bid made it difficult for Peoplesoft to generate sales; as customers were worried that if difficult for Peoplesoft to generate sales; as customers were worried that if they purchased Peoplesoft software it would be discontinued by Oracle in they purchased Peoplesoft software it would be discontinued by Oracle in the event of takeover, as Oracle had its own competing products and no the event of takeover, as Oracle had its own competing products and no incentive to continue the rival software. Ironically , Oracle really wanted incentive to continue the rival software. Ironically , Oracle really wanted Peoplesoft’s customer base, not the products or even many of its Peoplesoft’s customer base, not the products or even many of its employees. The takeover contest became very hostile with the management employees. The takeover contest became very hostile with the management of the companies launching personal attacks against each other. However, of the companies launching personal attacks against each other. However, eventually Peoplesoft succumbed in January, 2005. Oracle within a week eventually Peoplesoft succumbed in January, 2005. Oracle within a week sent payoff notices to thousands of Peoplesoft’s employees. While the sent payoff notices to thousands of Peoplesoft’s employees. While the poison pill did not directly help Peoplesoft’s employees, Peoplesoft’s poison pill did not directly help Peoplesoft’s employees, Peoplesoft’s shareholders benefited by the higher $10.3 billion takeover price. shareholders benefited by the higher $10.3 billion takeover price. Employees indirectly benefited as the prolonged contest allowed many of Employees indirectly benefited as the prolonged contest allowed many of them make alternative employment plans. It underscored the benefit of a them make alternative employment plans. It underscored the benefit of a poison pill even if it did not necessarily hold off a determined bidder who poison pill even if it did not necessarily hold off a determined bidder who is willing to pay higher and higher prices.is willing to pay higher and higher prices.

Thank You