Corporate finance

Poison Pill A poison pill is a shareholder rights plan adopted by a company to prevent or deter hostile takeovers. It massively dilutes the shares of any acquirer who accumulates a large stake without board approval, making a hostile takeover economically unviable.

Poison Pill as a Defense Against Activist Investors How boards use shareholder rights plans as a poison pill defense against activist investors and takeovers—and when courts uphold or reject them.

Poison Pill Ownership Thresholds: 15% vs 20% Triggers How poison pill ownership thresholds of 15% vs 20% affect shareholder rights plans and takeover defense timing.

Poison Pill Shareholder Rights Anti-dilution rights that trigger upon a hostile takeover attempt, diluting the acquirer's ownership stake.

Poison Pill Shareholder Rights Plan Learn how a poison pill shareholder rights plan dilutes a hostile bidder's stake upon crossing an ownership threshold, and when boards deploy this defense.

Poison Pill Sunset Provisions Explained Poison pill sunset provisions automatically expire a rights plan after a set period, addressing shareholder pressure to limit takeover defenses.

Poison Pill Trigger Thresholds Explained Understand how poison pill trigger thresholds—typically 10–20% ownership—are set to deter takeovers while leaving room for passive investors.

Poison Put Bond Covenants as a Takeover Defense How poison put bond covenants deter hostile takeovers by forcing acquirers to repay debt at par upon a change of control, raising acquisition costs.

Post-Merger Integration Failure Causes Why post-merger integrations fail: culture clashes, IT gaps, talent retention, and organizational misalignment destroy M&A value.

Precatory Resolution Non-binding advisory resolutions submitted by shareholders to signal governance expectations without directly compelling board action.

Progressive Dividend Policy Explained Progressive dividend policy commits a firm to raise nominal dividends each year, signaling confidence in earnings but creating pressure if growth falters.

Proxy Access Right allowing qualifying shareholders to place director nominees directly on the company proxy ballot.

Proxy Advisor A proxy advisor is a firm that analyzes shareholder voting issues and provides recommendations to institutional investors on how to vote their shares. The major proxy advisors wield significant influence over corporate governance outcomes.

Proxy Advisor Role in Activist Campaigns Proxy advisors like ISS and Glass Lewis wield decisive influence in activist campaigns, shaping shareholder votes on board seats and strategic changes.

Proxy Fight A proxy fight is a contest in which shareholders battle over the election of the board of directors. An activist or hostile bidder solicits proxy votes from shareholders to elect its own slate of directors.

Proxy Voting The mechanism by which shareholders, unable or unwilling to attend meetings in person, cast votes on director elections, executive pay, and corporate actions remotely.

Public company A public company is a corporation whose ownership shares trade on a public stock exchange and are freely available for purchase by any investor. Public companies face extensive regulatory requirements, including annual audits, quarterly disclosures, and shareholder voting rights.

Purchase Price Allocation The accounting process of assigning an acquisition's total price to tangible assets, intangible assets, and goodwill.

Purchase Price Allocation in an LBO How acquisition price is assigned across tangible assets, intangible assets, and goodwill after an LBO, and why allocation affects depreciation and tax shields.

Recapitalization to Add Leverage: When and Why Companies Do It Why mature companies deliberately increase debt-to-equity via recapitalization—tax shields, activist pressure, private-equity influence, and special dividends explained.

Record Date Arbitrage A trading strategy where investors acquire shares before the record date solely to obtain voting rights, then sell immediately after.

Regulatory Approval Risk How antitrust and foreign-investment reviews can delay, condition, or block a signed merger.

Related Party Disclosure Mandatory transparency about transactions between a company and its insiders, directors, or affiliated entities.

Representations and Warranties Seller's statements about company accuracy, condition, assets, and liabilities in an M&A transaction, subject to indemnification if false.

Representations and Warranties Insurance How representations and warranties insurance in M&A shifts indemnification risk from sellers to insurers, reducing escrow holdback and accelerating deal certainty.

Retained Earnings Reinvestment Rate Explained The retained earnings reinvestment rate—or plowback ratio—measures how much profit a company reinvests. Learn how it links to sustainable growth.

Retained Earnings vs Paid-In Capital How retained earnings and paid-in capital differ in origin, legal constraints, and what each reveals about a company's financial history and dividend capacity.

Reverse Break-Up Fee The compensation an acquirer pays the target company if the buyer fails to complete the transaction, typically due to financing collapse.

Reverse Merger A reverse merger is a transaction in which a private company acquires a public company (or a public shell company) and takes control of it, allowing the private company to access public markets without going through a traditional initial public offering.

Reverse Stock Split A reverse stock split is a corporate action in which a company reduces the number of outstanding shares by consolidating multiple shares into one. In a 1-for-10 reverse split, every 10 shares become 1 share, increasing the per-share price 10-fold while decreasing the share count.

Reverse Termination Fee vs Break-Up Fee Reverse termination fees are paid by buyers who exit a deal; break-up fees are paid by sellers who accept a competing offer. Each allocates different deal risk.

Revolving Credit Facility A committed bank credit line that allows a company to draw, repay, and redraw funds up to a fixed limit, typically used for short-term working capital needs.

Rights Offering and Dilution How rights offerings let existing shareholders buy new shares at a discount, dilution mechanics for non-subscribers, and typical use in capital raises.

Rollover Equity in Leveraged Buyouts Rollover equity occurs when selling shareholders, typically management, reinvest a portion of their sale proceeds into new equity in the buyout entity, aligning incentives and deferring taxes.

Rollover Equity Mechanics in a Sponsor-Led Buyout Selling shareholders or management roll existing equity into the new deal structure instead of cashing out, creating alignment and tax deferral.

Say on Frequency A shareholder advisory vote determining whether say-on-pay votes should occur annually, every two years, or every three years.

Say on Golden Parachute Advisory shareholder vote on executive severance benefits triggered by a change of control, mandated under Dodd-Frank.

Say-on-Pay An annual advisory shareholder vote on a company's executive compensation policies and practices, required by the Dodd-Frank Act.

Say-on-Pay Failure: What Happens After a Negative Vote When shareholders reject executive compensation in a say-on-pay vote, what happens next: board engagement, pay redesign, and the consequences for management.

Say-on-Pay Vote as an Activism Tool How activist investors use say-on-pay votes to signal dissatisfaction with executive compensation and drive governance change at public companies.

Say-on-Pay Vote Thresholds That Trigger Engagement The specific vote percentages at which say-on-pay vote results require formal engagement between companies and shareholders.

Schedule 13D Filing: When Activist Investors Must Disclose Schedule 13D filing is triggered at 5% ownership, requires disclosure within 10 days, and is the formal announcement that an activist investor has arrived and has a plan.

Schedule 13G vs 13D: Passive vs Active Investor Intent Schedule 13D signals activist intent to influence a company; Schedule 13G is for passive investors. Learn when each form applies and what triggers a 13D conversion.

Scorched Earth Strategy A defensive tactic where a target company deliberately destroys its own value by selling assets or incurring debt to repel a hostile acquirer.

Scorched-Earth Defense A scorched-earth defense is an extreme takeover strategy in which a target company deliberately damages itself or its assets to become less attractive to a hostile bidder. It may involve asset sales, debt accumulation, or dividend payments designed to hobble the acquirer.

Scrip Dividend: How It Works and Why Companies Use It Learn how a scrip dividend lets shareholders receive new shares instead of cash, the mechanics of the election process, and the dilution implications for existing holders.

Secondary Buyout A secondary buyout is a leveraged buyout in which the seller is another private equity firm. A PE firm acquires a company from another PE firm, rather than from a strategic buyer, family owner, or public market. Secondary buyouts have grown substantially as PE firms exit their investments into other PE buyers.

Secondary Buyout Explained A secondary buyout occurs when one private equity firm sells a portfolio company to another PE firm; even though the entry price is higher, strong operational gains still generate attractive returns.

Senior Secured Debt vs Unitranche in an LBO Senior secured vs unitranche debt structures in LBOs differ in cost, covenant flexibility, and lender relationships. Understand when each applies in mid-market buyouts.

Share Buyback Authorization Board approval to repurchase company stock from the market, modifying capital structure.

Share Buyback Safe Harbor Rule (Rule 10b-18) Explains the SEC conditions—timing, volume, price, and manner—that give companies a safe harbor from market manipulation claims when repurchasing their own shares.

Share Buyback vs Dividend: Tax Treatment Compared Why share buybacks and dividends have different tax consequences and how shareholder tax brackets influence corporate capital allocation decisions.

Share Repurchase vs Special Dividend Share repurchase vs special dividend for capital returns: tax treatment, signaling, flexibility, and how each impacts different shareholder groups differently.

Shareholder Meeting Quorum Requirements How shareholder meeting quorum thresholds are set, why they matter in activist campaigns, and what happens if a meeting adjourns due to lack of quorum.

Shareholder Proposal Rule SEC Rule 14a-8, which allows qualifying shareholders to place resolutions on corporate ballots, enabling direct shareholder influence over company governance.

Shareholder Proposal Submission Process Guide to SEC Rule 14a-8: how to submit a shareholder proposal at an annual meeting, eligibility thresholds, deadlines, and exclusion grounds.

Shareholder Rights Plan Defensive mechanism that allows shareholders to purchase additional stock at a discount if a hostile bidder crosses a triggering ownership threshold.

Shareholder Rights Plan Trigger Threshold How boards set the ownership percentage at which poison pill rights plans activate, blocking hostile takeovers.

Shark Repellent Collective term for corporate charter and bylaw amendments pre-emptively adopted to make hostile acquisitions structurally harder.

Short-Slate Proxy Contest: Targeting a Minority of Board Seats Short slate proxy contests let activists seek only minority board seats rather than full control, lowering costs and increasing odds of success.