What does a "poison pill" strategy aim to achieve in corporate takeovers?

A "poison pill" strategy is designed to make acquiring a company less attractive to potential hostile bidders. This tactic typically involves implementing measures that would either dilute the value of the company's shares or make the acquisition far more costly and complicated for the acquirer.

For example, companies may issue new shares to existing shareholders at a discount, allowing them to purchase shares quickly if a takeover is announced. This can make it prohibitively expensive for the potential acquirer to purchase enough shares to gain control. Poison pills serve to protect the company from being taken over by making the process daunting, thereby deterring hostile takeovers.

This approach reflects the company's desire to retain control and protect its interests, rather than simply maximizing share price or enhancing investor confidence directly. In this context, the poison pill is a defensive mechanism meant to safeguard the firm from unwanted takeover attempts instead of a measure focused on simplifying mergers or directly boosting share prices.