 There are many ways in which the managers of a target firm can resist potential takeovers. These ways can be used before the process of takeover and after the process of takeover. Let's see how these defensive tactics work. So first we have the deterring takeovers before being in play. This refers to the situation that is yet to start before the takeover transaction. And here we have a tactic in the name of corporate charters. These corporate charters establish conditions allowing a takeover. Acquisitions become difficult by frequently amended charters by the corporate shareholders. For example, a condition in the name of classified board. This says that only a fraction of the board is elected each year with terms running for multiple years. So this clause may prevent the bidder to go for a potential takeover. The second condition we see in the corporate charter is in the name of supermajority provisions. These provisions refer to the percentage of voting shares needed to approve important transactions such as mergers. Now these type of provisions clearly make acquisitions difficult in the face of hostile takeover transactions. The third we have board out clause. This clause disallows supermajority if the board approves the mergers. Thus it hinders only the hostile takeovers. Golden parachutes. These are the provisions of generous severance packages to the management of the target firm in the wake of takeover. These type of transactions raise acquisition cost of takeovers for the bidders because these costs are in fact the higher amount of purchases and the benefits offered to the management of the target firm. Now there is an argument in this particular case that it actually increases the probability of the takeover as the management to resist takeover because of the possibility of loss of their jobs. So it reduces managers inclination to the potential takeover transaction. Poison pills. These are the defensive tactics used by the target firm in order to prevent the potential takeover by the acquirer. These are generally effective in making the takeovers less attractive to the bidder. For example, taking a debt leaving a target firm over leveraged and potentially unprofitable for the bidder. The second type of defensive tactics are to take place after the firm is in play. So these are after the takeover. The green mill. A targeted repurchase of stock arranged by the managers to prevent takeover attempt. A firm buys back its own stock from a potential bidder at a substantial premium. The seller promises not to acquire the company for a specific period of time. So through this green mill transaction the happening of a potential takeover can be prevented. Steal agreement. This type of agreement occurs when the acquirer agrees to limits its holding in the target firm for a specific amount of fee. The target firm in this deal gets right of first refusal to the acquirer's sale of its shares. It prevents the block of shares from falling into the hands of the acquirer. It can be the possible acquirer in the wake of the hostile takeover. White knight. White knight is an individual or a firm that comes in to acquire an other firm to prevent its unfriendly acquisition. It normally offers higher price to purchase the firm that is the target firm. A white knight may also promise not to lay off the staff or fire managers or sell off divisions of the target firm. White skir. A third party is invited to make a significant investment in the target firm with the promise to vote in with the management and not to purchase additional shares in the target firm. Exclusionary self-tender. This is opposite to the targeted repurchase. In this case, the acquirer makes tender offer for a given amount of its own stock while excluding the target firm's shareholders. Recapitalization or leveraged. That is the issuance of debt to pay out a dividend. Recapitalization refers to the issuance of debt to buy back on shares. So these are the two transactions that can take place in case of a takeover. The implication for these two transactions for an acquirer is that it offers a higher tax shield owing to higher amount of leverage that raises share price too high. So this makes acquisition less attractive for the bidder. Recapitalization gives management greater voting control than before. So increase in control makes a hostile takeover more difficult for the bidder. Firms with heavy cash use this cash to pay a dividend or this cash can be used to buy back the stock of the firm. This means that firm with lesser cash holding loses its appeal as a takeover candidate for the bidder. Asserts restructuring. A firm can sell its assets or a firm can buy more assets in the wake of asset restructuring. So what happens if a firm goes for selling of its assets? The firm may sell its existing assets to prevent takeover due to two reasons. The first is that the rise in stock price falling divestiture will reduce the target's appeal to the bidder. The second reason is that the bidder's interest can be reduced by selling of any of the bidder's favorite division to some other party. A firm may buy new assets to prevent takeover because of two reasons. The first reason is that the bidder may like the target firm's asset structure as is. But with the buying of new assets the existing asset structure displaces. The second reason is that knowing that buying a firm will pose antitrust problem for the bidder. So the takeover will not take place as it will become unattractive for the bidder. The implications for these two types in asset restructuring is that it ineffective both ways as the bidder may sell additional assets in the firm. So he can turn the target firm's asset structure into his favor.