Question

Which of the following defensive tactic(s) to resist a merger could induce a firm to repurchase its own shares?

	A) Poison pill
	B) Golden parachutes
	C) Exclusionary self-tender
	D) Standstill agreement
	E) C and D

Answer 1

Answer:Exclusionary self -tender

Exclusionary self tender is one of the methods a firm uses to prevent a hostile take over .In a self tender defense the firm repurchases it's own shares by using the cash at it's disposal or by raising debt.As a result the cost of acquiring the target firm shoots up.

Other options explained

Poison Pill

False.This method allows the existing shareholders of the firm to purchase additional shares of the company at a discount and thereby diluting the equity and reducing the value received by the hostile buyer at a given price.

Golden Parachutes

False.Refers to the benefit(payout) that a top executive would receive as a result of the agreement between the executive and the company,that the executive would receive if the individual would lose their job during a merger or takeover.

Standstill Agreement

False.Refers to a hostile takeover defense mechanism.The standstill agreement contains provisions that specify how an acquirer can purchase or dispose of the stock of the company.