Killer Bees

What Are Killer Bees?

Killer bees are companies or individuals — like investment bankers, accountants, lawyers, and tax subject matter experts — that help target firms try not to be taken over by an undesirable admirer. Their job is to devise and execute anti-takeover defense strategies, which generally comprise of making the target less alluring or more troublesome or exorbitant to secure.

Understanding Killer Bees

At the point when a company targets another for acquisition, it will generally first approach its board of directors. On the off chance that repelled, the acquirer could return with a better bid, walk away, or try to sidestep management by initiating a tender offer straightforwardly to shareholders.

Should takeover advances turn unfriendly or hostile, killer bees might be brought ready. Their job is to thought of achievable ways of making life awkward for the prospective buyer, like how their namesake stings its casualties when incited until they ease off and disappear.

Killer bees rose to prominence during the 1980s hostile takeover frenzy. In those days, a category of investors with deep pockets, known as raiders, started buying undervalued companies and afterward questionably dismembering them to bag a quick profit. Corporate America wasn't utilized to this type of behavior and enrolled the assistance of experts to shield against these attacks.

Killer bees would introduce a series of options to the target's board in view of its individual conditions and the qualities of the company seeking to buy it. To thwart a hostile takeover endeavor, they generally aim to make the prey either too costly to acquire or so ugly that the predator loses interest.

Killer Bees Methods

Following the 1980s, defensive measures known as shark repellents were contrived to deter unfriendly takeover endeavors. Famous strategies that killer bees use include:

• Flip-In Poison Pill: Existing shareholders are conceded the right to purchase extra shares at a discount, in this way diluting the ownership interest of the hostile party and making it harder and more exorbitant for it to gain control.
• White Knight: A friendly company steps in to purchase the target on the verge of being dominated.
• Pac-Man: Named after the classic eat-or-be-eaten arcade game, the target company reverses the situation on the acquirer by making a takeover bid for it.
• Lobster Trap: A provision is passed prohibiting any shareholder with an ownership stake of in excess of 10 percent from converting convertible securities into voting stock, subsequently preventing large shareholders from gaining an adequate number of votes to force the board to acknowledge the merger.
• Poison Put: A bond is issued that investors can reclaim in full before its maturity date.

Litigation, for example, standstill agreements, could likewise be utilized to postpone any takeover.

Analysis of Killer Bees

A considerable lot of the anti-takeover defense strategies that killer bees use don't sit well with shareholders. Making the target less appealing or more costly to buy generally has a propensity for eroding shareholder value and possibly crippling the company into the indefinite future.

The uncommon idea of a portion of these measures, and the successive inability of standard shareholders to vote on them, has driven their legitimateness to be questioned. Not all hostile bidders plan to make a quick buck and ruin companies and, at times, being taken over by one of them could be more beneficial from a financial standpoint for existing investors.

Significant

The strategies killer bees utilize are frequently questionable and not generally good for shareholders, prompting the courts to intervene sometimes.

Limitations of Killer Bees

Throughout the long term, these perceptions have driven the courts to incidentally block companies from employing anti-takeover measures, in the event that they are considered to be irrational. The prospect of intervention from higher powers inevitably means that it is currently a lot harder for killer bees to deliver on their commands.

Features

• Killer bees rose to prominence during the 1980s when corporate America went under attack from crafty investors known as raiders.
• Their job is to devise anti-takeover defense strategies that make the target more troublesome or exorbitant to secure.
• Killer bees are companies or individuals that assist with targeting firms try not to be dominated.
• The strategies killer bees utilize are frequently disputable, habitually questioned by shareholders, and risk being toppled by the courts.