Greenmail

This practice is not a kind of takeover defense in terms of protecting a corporation. Means much more an attitude of recognizing a raider force, and premium to be free of the attack. There's a long controversy around it, once its not fair for shareholders to pay premium for raiders. The discussion shakes all shareholders, once sometimes they are not the management one whoever decide theses payments.

If paid, it can bring the certainty of takeover free at least from that bidder. But it has effects, and some studies conclude that as consequence shares has a decline. Some countries forbid such hostile takeover behave. Its a wide discussion ended in Courts, whenever shareholders interests and vote face takeover defense of management and controllers. The great controversy is about fairness of paying these millionaire premiums for attackers. If it is really the way to be.

For the free market standpoint, it can push target company toward. By considering such possibility, some companies do really make strong needed restructuring. Stepping through some reforms that can improve its performance. Instead of letting the corporation by its own, pressure for necessary measures that can be healthy.

Greenmail pushes aside that hostile bidder. But by a millionaire premium it can further boost interest of raiders and megainvestors all over, searching for a good opportunity. For that reason qualify it as a defense may be not quite proper. It recognizes an unsolicited offer and risk, and shareholders may take a burden of something they're apart.

Further texts:

Merger Option The option of merger operation or not