Answer :
Tender offers and poison pills are both strategies related to hostile takeovers. A tender offer is a public offer made by an acquiring company to purchase the shares of a target company directly from its shareholders. On the other hand, poison pills are defensive measures implemented by the target company to discourage hostile takeovers.
A tender offer is needed in hostile takeovers to provide an avenue for the acquiring company to directly communicate with the shareholders of the target company. By making a public offer, the acquiring company can bypass the management of the target company, which might be resistant to the takeover. This allows the acquiring company to gain control of the target company by convincing shareholders to tender their shares in exchange for a premium price.
Poison pills, on the other hand, are defensive tactics employed by the target company to deter hostile takeovers. These provisions are typically included in the target company's bylaws or shareholder rights plan. A poison pill works by triggering certain conditions that make the takeover less attractive or more costly for the acquiring company.
For example, it may allow existing shareholders to purchase additional shares at a discounted price, diluting the acquiring company's ownership stake and making the takeover more expensive. Poison pills can also give shareholders rights that become valuable only if a takeover is attempted, further deterring potential acquirers.
Both tender offers and poison pills are tools used in the context of hostile takeovers, with tender offers being a method for acquiring shares and poison pills serving as a defensive mechanism to protect the target company from being taken over against its will.
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