Flip Over Poison Pill - Explained
What is a Flip Over Poison Pill?
Written by Jason Gordon
Updated at March 10th, 2022
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Table of Contents
Flip-Over Poison Pill DefinitionA Little More on What is a Flip-Over Poison PillAcademic ResearchWhat is a Flip-Over Poison Pill?
There are many types of poison pills that target device to foil the attempts of acquiring company in a hostile takeover bid. A flip-over poison is a tactic in which shareholders of the existing company are allowed to buy the shares of the acquiring company at a discount. However, this purchase is allowed to take place only if the takeover bid witnesses success. Shareholders buy shares of the acquiring company at a very discounted rate.
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How Does a Flip-Over Poison Pill Work?
The flip-over poison pill allows the shareholders of the target company to buy the shares of the acquiring company at a discount after the takeover bid has been successful. With the purchase, the shares held by the existing shareholders of the acquiring company become diluted. When a company proposes this to the acquiring company, the acquisition becomes unappealing, therefore further negotiations occur between both companies. Before a flip-over poison pill can take effect, it must be included in the bylaws of the acquiring company. The flip-in poison pill is different from the flip-over poison pill, when it is used, shareholders of the existing company are allowed to purchase shares of the target company at a discounted price.