Corporate Takeover Jargon

I just came across a funny section in my Corporate Finance book. It is a sort of glossary of business jargon relating to corporate takeovers and ways to avoid them.

In my many years in business I have never heard these terms. It might be because I am from the world of small business and have never dealt with a merger or acquisition, but I would think I might have at least heard the terminology somewhere...maybe in undergrad? If these terms were ever mentioned I certainly don't remember.

1. Golden parachutes - Some target firms provide compensation to top-level management if a takeover occurs. This can be viewed as a payment to management to make it less concerned for its own welfare and more interested in stockholders when considering a takeover bid. Alternatively, the payment can be seen as an attempt to enrich management at the stockholders’ expense.
2. Crown jewels - Firms often sell major assets—crown jewels—when faced with a takeover threat. This is sometimes referred to as the scorched earth strategy.
3. Poison pill - Poison pill is a term taken from the world of espionage. Agents are supposed to bite a pill of cyanide rather than permit capture. Presumably this prevents enemy interrogators from learning important secrets. In finance, poison pills are used to make a stock repellent to others. A poison pill is generally a right to buy shares in the merged firm at a bargain price. The right is granted to the target firm’s shareholders, contingent on another firm acquiring control. The right dilutes the stock so much that the bidding firm loses money on its shares. Thus, wealth is transferred from the bidder to the target.
4. White knight - A firm facing an unfriendly merger offer might arrange to be acquired by a different friendly suitor. The firm is thereby rescued by the white knight.
5. Lockup - A lockup is an option granted to a friendly suitor (perhaps a white knight) giving the right but not the obligation to purchase stock or a portion of the assets (perhaps the crown jewels) of the target firm at a fixed price in the event of an unfriendly takeover.
6. Shark repellent - A shark repellent is any tactic that makes the firm less attractive to a potential unfriendly offerer.
7. Bear hug - A bear hug is an unfriendly takeover that is so attractive that the target firm’s management has little choice but to accept it.

Excerpt taken from Corporate Finance (2004 Edition) by Stephen Ross, Randolph Westerfield, & Jeffrey Jaffe

These cracked me up! I think shark repellent is my favorite. This would also be a great term for avoiding lawyers or other legal action.

They don't exactly embody what I would expect for "high class" corporate lingo. I guess people get creative, not only with tactics, but with describing those tactics when they feel their business or livelihood is threatened.

Does anyone else have examples of quirky corporate lingo? If so, please add them to the comments. I'd love to expand my vocabulary!

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