Question

A hostile takeover is a situation in whicha.the management and board of directors of the targeted firm disapprove of the proposed merger.b.stockholders are paid a golden parachute.c.the targeted firm is dismantled to avoid the merger.d.the government makes the decision that the corporate raider can purchase the targeted firm.e.the corporate raider receives a sum of money to leave the targeted firm alone.

Answer 1

Answer: a - the management and board of directors of the targeted firm disapprove of the proposed merger

Explanation:

A hostile takeover is a situation where the board of directors and senior managers are against the proposed merger.

There are several pre-offer takeover defense mechanisms. One of them is the golden parachute.

The golden parachute is a compensation agreement between a firm and its senior managers. The firm promises a very lucrative amount of money if the senior managers leave the firm if there's a change of control.

There are also post offer takeover defense. They include:

A. The crown jewel - in a crown jewel the firm sells off a subsidiary or an asset to a third party in an effort to mitigate the hostile take over.

B. Greenmail - the target buys its shares back from the acquiring company at a price higher than the market price. This is done with an agreement that the acquirer leaves the target company. It is a form of payoff by the target company.