Legal English Dictionary
poison pill
nouna type of defensive measure used by a company to avoid a hostile takeover by making a takeover more difficult and more expensive. There are several types of poison pills, including: the flip-in, in which the target company's shareholders buy further shares in the target company to reduce the overall percentage of shares held by the acquiring company, the flip-over, in which shareholders buy the acquiring company's shares at a discounted price after the merger and the lock-up option the term used where a stock option is offered to a white knight by a target company in return for either a substantial amount of additional equity or for the purchase of a valuable portion of their company; the high value of the lock-up option may deter an unwanted third party from acquiring the target companyThe board adopted a poison pill to avoid a hostile takeovcer.