Takeover is the purchase of a business/ company (the target/ acquiree/ acquired) by another (the acquirer). A privately held company is purchased, in a takeover, in whole, while an acquirer purchases a publicly traded company by acquiring a controlling interest in it. Takeovers can take place by means of friendly (friendly takeover) or unfriendly bids (hostile takeover). In the case of unfriendly bids, the target company may fight back with a host of techniques such as shark repellents. Other techniques include unsolicited merger proposals to incumbent management, accumulation of shares in the open market, or proxy fights (aiming  to replace incumbent management with a new one).

A target company can take other certain measures to thwart a takeover. Such anti-takeover defenses are white knight, scorched earth, ESOPs, defensive acquisitions, and litigation:

• White knight: a friendly suitor that is recruited to fend off the hostile suitor. The former blocks the way for the latter to proceed with its bid.
• Scorched earth: setting terms that would facilitate the key talent of the target company to leave if any large stake was acquired.
• ESOPs: employee stock option plans that can dilute the attacker’s ownership position in the acquired company. These plans are kind of benefit schemes that enable employees to own part or all of the company they work for.
• Defensive acquisitions: arrangements made by a company to deplete as much cash as possible on its balance sheet. This tactic makes its more difficult for the attacker to acquire the target company using its own cash.
• Litigation: staging defenses against the attack through courts of law. This tactic can tie up or divert management’s time and focus.