Table 1:

Defence strategies USED BY target firms

Defence strategy

Description

Knocking copy

Part of defence document attacking bid terms and bidder

Bidder shareholder appeal

Appeal to bidder shareholder to vote down bid

Profit forecast

Forecast for current accounting year

Profit report

Report profit for past year

Increased dividend

Higher dividend declared for past/current year or forecast for the future

Asset revaluation

Strengthen balance sheet to show bid undervalues target

Divestment

Announce sell-offs/spin-offs

Acquisition

Announce acquisitions/mergers

Management change

Change directors/top managers

Friendly shareholders

Lobby family shareholders/friendly institutional shareholders

White squire

A friendly party which buys a strategic stake to block the hostile bid

White knight

Friendly bidder countering the hostile bid

Antitrust lobbying

Lobby Office of Fair Trading/other anti-trust authorities

Regulatory appeal

Appeal to Takeover Panel/Stock Exchange alleging violation of their rules

Litigation

To enforce anti-trust rules or force nominee shareholding disclosure

Political lobbying

Lobby national/local politicians to argue bid is against public interest

Union support

Lobby unions pointing to future redundancies/loss of pension rights

Customer support

Seek customer/supplier support to sow doubts about future target performance under bidder

Pre-emption letter

Advice to target shareholders before sending formal defence document

Advertising

Advertising/public relations campaigns

Good news

Information about new products/contracts/discoveries

Red herring

Attack bidder on peripheral matters

Blocking

Any other strategy eg golden parachute, recapitalisation

Source: City University Business School/Acquisitions Monthly/AMDATA III, January 1994

Table 2:

Use of defensive strategies classified by outcome

                                 Defence outcome (%)

Strategy

Successful

Failed

t stat

Knocking copy

66.7

64.8

0.28

Profit forecast

40.8

50.5

-1.40

Increased dividend

41.5

45.1

-0.50

Anti-trust lobbying

35.4

29.7

0.90

Friendly shareholders

32.0

16.5

2.64a

Profit report

22.4

19.8

0.48

White knight

24.5

11.0

2.56a

Divestment

13.6

22.0

-1.68c

Regulatory appeal

15.0

15.4

-0.00

Asset revaluation

12.2

15.4

-0.60

Good news

14.3

8.8

1.25

Acquisition

12.9

11.0

0.44

Blocking

8.8

11.0

-0.50

Red herring

10.2

7.7

0.65

Political lobbying

8.2

6.6

0.44

Union support

9.5

2.2

2.19b

Pre-emption letter

7.5

4.4

0.95

White squire

6.1

4.4

0.56

Customer support

5.4

4.4

0.35

Litigation

7.5

2.2

1.74c

Advertising

2.7

6.6

-1.40

Management change

4.8

3.3

0.54

Bidder shareholder appeal

2.7

2.2

0.25

Notes: The t test is a test of difference in proportions between the successful and failed defence groups.  t stat is the test statistic.

a, b, c indicate significance at the 1% (strongest), 5% and 10% (weakest) levels.

Source: City University Business School/Acquisitions Monthly/AMDATA III