Golden Parachute

Golden parachute is the pre-offer defense. how come it become the defense weapon for the target? what is the rational?

it is just the offer from acquirer to pay something for the target management team.

please add some comment.


Golden Parachute is basically a very handsome severance to the management of the target firm.

In the event of a takeover of the target, the management of the target firm would get paid an exorbitant amount of money that would make the economics of the takeover negative to the acquirer.

Do you have any tip to identify the Pre-Offer and Post-offer defense. So confused.


To identify them? Yes - the readings identify them pretty well, just memorize them.

Actually, the severance packages included in golden parachutes alone are not likely to be large enough, relative to the value of the target firm, to deter a would-be suitor. But it does increase the cost of acquisition!

+1, golden parachutes are used in combination with other defenses tactics.

I always found it rather intuitive. Pre-offer are the actions that can be taken before an acquirer has expressed interest, post-offer defenses make more sense to be employed after such.

For example, poison pills/puts, supermajority voting provision, staggered board of directors and golden parachutes would obviously be put in place early on, before any offer is extended.

Greenmail, white knight/squire, changing the capital structure, and crown jewel defenses would only be practical after an offer is extended. You’re not going to be paying anyone off, or finding someone else to buy up your firm, or selling off a major asset of your firm, or leveraging your firm right up to prevent an acquisition until someone’s expressed interest in that.

Here’s a fun fact: Usually pre-offer defenses are more effective. Post-offer defenses run a higher risk of failing under litigation.

in case of golden parachute, it is the pre-offer. if the acquireer has not offered a deal yet , how can it be put down a deal to require the package for the managment.

It is put in place long before anyone even thinks of acquiring them.

What’s the difference between white knight and white squire post-offer defenses? White knight seems clear…involve someone else to bid.

White knight will take a majority position while a white squire will take a minority position. (disclaimer - i am an aurthurian legend fan :slight_smile: )