What are killer bees?

Killer bees are firms or individuals, such as investment bankers, auditors, attorneys, and tax specialists, that assist target firms in avoiding a hostile takeover. Their responsibility is to develop and implement anti-takeover defense strategies, which typically involve rendering the target less desirable, complex, or expensive to acquire.

Understanding Deadly Wasps

Typically, when a company intends to acquire another, it will first approach its board of directors. If rejected, the acquirer may resubmit a higher offer, withdraw, or attempt to circumvent management by initiating a tender offer directly to shareholders.

Killer bees may be brought on board if hostile or antagonistic takeover advances are made. Their job is to devise methods to make the prospective buyer’s life unbearable, similar to how their namesake stings its prey until they retreat.

Killer bees came to prominence during the 1980s hostile takeover craze. Then, investors with deep pockets, known as raiders, began purchasing undervalued companies and controversially dismantling them for a fast profit. Corporate America was unfamiliar with this type of conduct and enlisted the aid of specialists to defend against these assaults.

Based on the target’s unique circumstances and the company’s characteristics in seeking to acquire it, Killer Bees would present the target’s board with various options. To thwart hostile takeover attempts, companies typically attempt to make their prey either too expensive to acquire or so unappealing that the predator loses interest.

Methods of Vespidae

Following the 1980s, defensive measures referred to as shark repellents were developed to deter hostile takeover attempts.

• Flip-In Poison Pill: Existing shareholders are granted the right to purchase additional shares at a discount, diluting the antagonistic party’s ownership interest and making it more difficult and expensive for it to gain control.
• White Knight: A friendly corporation purchases a target on the verge of being acquired.
• Pac-Man: Named after the classic eat-or-be-eaten arcade game, the target company makes a hostile takeover offer for the acquirer.
• Lobster Trap: A provision prohibiting any shareholder with an ownership stake of more than 10 percent from converting convertible securities into voting stock, thereby preventing large shareholders from acquiring sufficient votes to compel the board to approve the merger.
• A bond that investors can redeem in full before its maturity date is poison.

Litigation, including standstill agreements, could be used to delay an acquisition.

Attacks against Killer Bees

Many anti-takeover defense strategies employed by killer wasps are unpopular among shareholders. Generally, making the target less desirable or more expensive to acquire tends to erode shareholder value and potentially weaken the company for years.

Their legality has been questioned due to the extreme nature of some of these measures and the frequent inability of regular shareholders to vote on them. Not all hostile bidders want to destroy businesses and make a quick buck; in some cases, existing investors would benefit more from one of these bidders acquiring them.

Limitations of Deadly Wasps

Through the years, these observations have led courts to occasionally prohibit companies from employing anti-takeover measures if they are considered unreasonable. As a result of the possibility of intervention by superior powers, it is now much more difficult for assassin bees to carry out their missions.

Conclusion

• There are companies or people called “killer bees” that help other companies stay independent.
• Their job is to develop defenses against takeovers that make the target more challenging to get or cost more to get.
• Killer bees became more well-known when greedy investors attacked corporate America’s “raiders” in the 1980s.
• Killer bees’ tactics are often controversial; owners often question them, and the courts could throw them out.