Kamikaze Defense

According to the Kamikaze Defense definition, it is a mechanism of takeover defense that is mostly undertaken by a company for preventing a take-over. While the mechanism would not involve the drastic step of ending the corporate life altogether, this defense mechanism might involve harm that is self-inflicted.

It could also involve the adoption of measures that might turn out detrimental to the financial condition or operations of the business for reducing the overall attractiveness of the company to some hostile bidder. The mechanism of Kamikaze Defense might be desperate. However, the hope here is that the respective bid for taking over the company might be avoided.

Understanding Kamikaze Defense

A company that would not want to go into the hands of competitors might try out the mechanism of Kamikaze Defense as its last resort. Usually, in a typical acquisition process that is intended, the interested party is going to create a small stake in the company that is targeted. At the same time, the interested party would also approach the respective Board of Directors with a proper offer of buying or taking over the company.

If the board would rebuff the given offer, which could be the case when the board & its financial advisors would believe that the offer unvalued the company substantially, the interested company would assume a highly aggressive stance for taking over the given company. If the potential acquirer of the company feels that the given taking-over process is not going anywhere with an increasing number of pressing negotiations, it might consider going hostile with some tender offer or launching a proxy battle for controlling the company.

As a response, the targeted company might seek help from the White Knight –a friendly entity or party that is generally responsible for holding together the ongoing business operations of the organization without dismantling or disrupting it. Another famous mechanism for takeover defense undertaken by organizations turns out to be “poison pill.” It is usually regarded as a move that turns out to be shareholder-unfriendly. However, it is still considered to be mild in comparison to the actions relative to Kamikaze Defense. Some of the effective steps undertaken are selling crown jewels of the organization, loading on debt, and dilutive acquisition.

Kamikaze Defense might end up being successful in the end. However, the organization would leave itself in a poor, weakened state.

Kamikaze Defense Strategies

There are some of the common Kamikaze Defense strategies that are utilized by businesses across the world. These are:

• Sale of the Crown Jewels
• Fat-man strategy
• Scorched-earth strategy