Which of the Following Statements Regarding 'Poison Pills' Is FALSE

question 2

Multiple Choice

Which of the following statements regarding 'poison pills' is FALSE?

• A)Poison pills also increase the bargaining power of the target firm when negotiating with the acquirer because poison pills make it difficult to complete the takeover without the cooperation of the target board.
• B)Companies with poison pills are harder to take over, and when they are taken over, the premium that existing shareholders receive for their shares is higher.
• C)Because a poison pill increases the cost of a takeover, all else equal, a target company must be in better shape to justify the expense of waging a takeover battle.
• D)By adopting a poison pill, a company effectively entrenches its management by making it much more difficult for shareholders to replace bad managers, thereby potentially destroying value.

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Definitions:

Unskilled Labor

Work that requires minimal specialized skills or training, often involving manual tasks that can be quickly learned on the job.

Bargaining Power

The relative capacity of parties in a negotiation to influence the terms of their agreement.

Globalization

The act of connecting and merging between individuals, businesses, and state entities globally, frequently motivated by international trade and investment, and supported by information technology.

Financialization

The increasing dominance of financial markets, financial motives, financial institutions, and financial elites in the economy, affecting the management and control of companies and even governments.