What Does
Defensive Merger Mean?
A defensive merger is a situation where a target organization wants to avoid acquisition by a particular takeover firm. For this to happen, the target organization chooses to merge with another organization so that they cannot be acquired by the initial acquisition firm.
Divestopedia Explains Defensive Merger
Defensive mergers are a very difficult decision for a target firm’s management. They have to choose between being acquired by an undesirable candidate or merging with what is usually their biggest competitor. The option to stay independent is often off the table because of the resources needed to stave off acquisition. Therefore, a defensive merger is typically the best option in order to retain some ownership while hopefully forming successful synergy with the merging firm.
A defensive merger is a strategy employed in the public markets rather than the private markets. A private middle market company that is approached by an undesirable acquiror will simply not pursue the transaction and will not be subject to the threat of a public market takeover or stock purchase.