Killer Bees

Killer bees are firms or individuals that help other companies avoid takeovers, such as investment bankers, accountants, attorneys and tax specialists, by aggressively devising and implementing anti-takeover strategies. These generally make the target company less attractive or more difficult to acquire, by forcing acquirers to pay more, or by diluting the acquirer’s holdings.

During the 1980s hostile takeover craze, killer bees would, like their namesake, act aggressively on behalf of a firm threatened by a hostile takeover. All manner of strategies and tactics were employed to thwart hostile takeovers. These takeover defenses included shark repellents to make the takeover less attractive or profitable to the acquisitive firm, such as poison pills and suicide pills — which would drive the firm into bankruptcy.

Other tactics which emerged during the 1980s, included the white knight defense, where a friendly company acquires a corporation on the verge of being taken over, and white squires which would buy a partial stake in a target company. In the Pac-Man defense, named after the classic eat-or-be-eaten arcade game, the target company would turn the tables on the acquirer by making a takeover bid for it. In the lobster trap, the target company would pass a provision that prevents any shareholder with an ownership stake of over 10% from converting convertible securities into voting stock – to prevent large shareholders from gaining enough votes to force the board to accept the merger.

Another technique that was popular during the 1980s was greenmail, where the target company buys back its recently acquired stock from a raider at a higher price – and at shareholders’ expense — in return for the raider agreeing not to make another takeover attempt. By using whitemail, and issuing a large number of shares at below-market prices, the target company could also make the acquisition much more expensive to complete.

Litigation, such as standstill agreements, might also be used to delay any takeover.