Poison pill
M&A / Merger ModelA US defence letting a target flood the market with discounted shares once a bidder crosses a threshold, making the stake prohibitively dilutive.
Also written: shareholder rights plan
The mechanism is a rights plan triggered when any holder passes a set percentage, often 10% or 15%. Every other shareholder can then buy new shares at a steep discount, massively diluting the bidder and making further accumulation pointless.
It is rarely triggered. Its purpose is to force a hostile bidder to negotiate with the board, which can redeem the pill, rather than go directly to shareholders.
It is essentially a US instrument. Under Rule 21 of the UK Takeover Code, adopting one once an offer is imminent would be frustrating action requiring shareholder approval, which in practice means it will not happen.
That contrast is the substance of the comparison, and it reflects a genuine philosophical difference: Delaware gives boards latitude to defend, the UK gives the decision to shareholders.