Briefly describe two ways to resist a hostile takeover. What will be

QUESTION

Briefly describe two ways to resist a hostile takeover.

What will be an ideal response?

ANSWER

Answer: A company can try to resist a hostile takeover in two ways: by finding a white knight or by launching a poison pill. Finding a white knight means locating an alternative buyer who is more acceptable to the company’s management. Launching a poison pill means doing something to take on more debt so the company will look less financially attractive to the raider, who perhaps will change his or her mind.
Explanation: The two ways to resist a hostile takeover are by finding a white knight or by launching a poison pill. Finding a white knight means locating an alternative buyer. The technique is to find a buyer for the company who is more acceptable to management. Launching a poison pill means taking on more debt to make the company less attractive. Managers take actions designed to make the stock less attractive to the potential buyer—that is, force the company to take on large amounts of debt to make the firm less attractive to the raider.