Poison Pill
Shareholder Rights Plan
In business, a type of defensive tactic used by a corporation's board of directors against a takeover. Typically, such a plan gives shareholders the right to buy more shares at a discount if one shareholder buys a certain percentage or more of the company's shares.
Origin
Invented in 1982 by mergers and acquisitions lawyer Martin Lipton of Wachtell, Lipton, Rosen & Katz during hostile takeover battles in Texas, including General American Oil's defense against corporate raider T. Boone Pickens. The strategy allows shareholders to buy discounted shares if an acquirer crosses a threshold (typically 20%), diluting the bidder's stake and raising acquisition costs. The Delaware Supreme Court affirmed its legality in 1985. The name references cyanide capsules spies supposedly carry for capture scenarios.