Definition of poison pill
: a financial tactic or provision used by a company to make an unwanted takeover prohibitively expensive or less desirable
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Recent Examples of poison pill from the Web
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The poison pill would end the Medicaid expansion approved by the Legislature in 2013, which covers 680,000 Michiganders with health care, if the federal government fails to approve a waiver within 12 months.
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As part of the deal disclosures, Xerox for the first time published the full joint venture agreements—the poison pill.
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The alternative is to hold fast to the Lighthizer poison pills that Mexico and Canada refuse to accept and settle in for what could be years of combat with a mercantilist Mexican government.
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But Jeffries and Collins agreed to scrap that poison pill.
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Congressional conservatives, deeming public housing socialistic, resolved to defeat Truman’s 1949 legislation with a poison pill amendment banning racial discrimination in public housing.
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That gave Democrats leverage to force GOP negotiators to drop numerous policy riders that Democrats considered poison pills.
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There is no reason why including DACA in the budget, those on the Democratic side should have to give away fatal elements, poison pills, in order to get both the budget and DACA done.
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The deal proposed by the administration contained poison pills for both the right (legal status for some DACA recipients) and the left (drastic changes to legal immigration).
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'poison pill.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
First Known Use of poison pill
1983
Financial Definition of POISON PILL
poison pill
What It Is
A poison pill is a strategy that tries to create a shield against a takeover bid by another company by triggering a new, prohibitive cost that must be paid after the takeover.
How It Works
There are many poison pill strategies that have been used by companies against hostile takeovers and corporate raiders. For example, offering a preferred stock option to current shareholders allows them to exercise their purchase rights at a huge premium to the company, making the cost of the acquisition suddenly unattractive. Another method is to take on a debt that would leave the company overleveraged and potentially unprofitable.
Some companies have created employee stock ownership plans that vest only when the takeover is finalized. In addition to a dilution of the stock value, such employee benefits may result in an employee exodus from the company leaving it without its talented workforce (which is often one of the drivers of the acquisition).
Another example is to offer a series of golden parachutes for company executives. This could also make the takeover of the company prohibitively expensive the buyer had planned to replace the top management.
Finally, one non-financial method of a poison pill is to stagger the election of the board of a company, causing the acquiring company to face a hostile board for a prolonged period of time. In some cases, this delay in gaining control of the board (and therefore the votes necesarry to approve certain key actions) is a sufficient deterrent for a takeover attempt.
An extreme implementation of a poison pill is called a suicide pill.
Why It Matters
Poison pills raise the cost of mergers and acquisitions. At times, they create enough of a disincentive to deter takeover attempts altogether. Companies should be careful, however, in constructing poison pill strategies. As a strategy, poison pills are only effective as a deterrent. When actually put into effect, they often create potentially devastatingly high costs and are usually not in the best long-term interests of the shareholders.
Source: Investing Answers
POISON PILL Defined for English Language Learners
poison pill
Definition of poison pill for English Language Learners
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business : something that a company does to make itself less valuable or appealing in order to avoid being bought by another company
Law Dictionary
poison pill
noun
poi·son pill
legal Definition of poison pill
: a financial tactic or provision used by a company to make an unwanted takeover prohibitively expensive or less desirable
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