The downside to the scorched tactic is that the items and infrastructure that were destroyed could also no longer be used by the troops who destroyed them. During times of war, troops would destroy valuable goods – crops, buildings, routes in and out of towns – in order to make them unusable by enemy troops. The term “scorched earth” started as a military term. This move will dilute the value of the acquiring company’s outstanding shares. Trying to “scorch” the acquirer as well by using a “poison pill” tactic such as the flip-over strategy, which enables shareholders of the target company to purchase discounted shares of the acquiring company if the takeover is successful.The acquiring company would then be forced to pay off the outstanding debt, thereby eroding its profits. Making agreements to repay debts as soon as the hostile takeover is completed.Liquidating or terminating significantly valuable assets and securities.In order to make itself less attractive, a targeted company may do a number of things, including: Essentially what happens is that a company targeted for takeover does everything it can reasonably do to make itself unattractive, hopefully discouraging the potential acquirer from continuing the takeover attempt. In finance, a scorched earth policy is a tactic that a company can use to prevent a hostile takeover. Updated JanuWhat is a Scorched Earth Policy?
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