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Poison pill

Poison pill is a business term referring to a strategy to avoid a hostile takeover bid.

Specifically the target of the takeover will take on large debts in an effort to make the debt load too high to be attractive (the company doing the takeover must pay the debts). Another strategy is to buy a number of smaller companies using a stock swap, which dilutes the value of the companies stock and makes it less attractive. The debts (or companies) can be sold off at a later date when the takeover is no longer a threat.



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