Vanderbilt Law Review

First Page



Since 1980 corporate takeover transactions have increased dramatically in size and volume.' Along with the rise in acquisition activity has come a marked increase in the number of contested or hostile take-overs. The proliferation of hostile bids for corporate control' has brought about the development of new offensive and defensive take-over tactics. One of the newest defensive devices is known as a "poison pill," or shareholder rights plan. This device is designed to make the target corporation (target) prohibitively expensive to an acquiring corporation (acquiror) in the event of a hostile takeover or tender offer.'Since the 1985 decision in Moran v. Household International, Inc., in which the Delaware Supreme Court upheld the adoption of a poison pill defensive plan by the Household board of directors," several hundred large public corporations have implemented their own versions of the shareholder rights plan. Although more than 500 companies have adopted poison pill plans, the device remains controversial.