Fighting back

A board of directors that attempts to defeat a hostile takeover attempt will try to raise the cost and lower the value of the shares the raider needs to complete the takeover. This can be achieved using binding contractual arrangements with the target’s customers, suppliers, and employees, that lower the value of the firm if it is acquired, but do not directly affect it otherwise. Boards resisting a hostile takeover will also issue carefully designed securities to the target’s bondholders and shareholders that have a similar effect. Ultimately, a target’s board can reconfigure the firm’s capital structure to defeat a takeover attempt. This chapter describes the tactics involved using the bitter takeover battle involving Carl Icahn and Lions Gate Entertainment.