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Kamikaze Defense
A kamikaze defense is a method for deterring a potential acquirer from purchasing a company.
How it works:
Kamikaze defense is named after the suicide attacks of Japanese pilots during World War II. For example, Company FGH makes a bid to buy Company STW. The STW board of directors does not want to sell the company, but Company FGH goes directly to the Company STW shareholders and offers to buy their shares for a 15% premium.
Fearful that Company FGH may be successful in its efforts, Company STW sells its key intellectual property and randomly buys Company X35, which makes cigarettes and horsemeat. Company FGH finds Company STW less attractive and drops its bid.
Why it Matters:
The kamikaze defense is near suicide in that the board has to be willing to nearly kill the company in order to save it from acquisition. This is very risky, and in some cases the shareholders will oppose the effort. For this reason, the kamikaze defense is often a last resort.
