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hello john i did my p4 this thime
can i know what poison pills are ,and how they are used as defense tactics by a company by protecting it from a takeover…? it was worth two marks i think
i just wrote that it was manupulation of share price and so it will prevent it from being taken over …would i be wrong ?
and als0 there was a question asking THE ADVANTAGES ONLY of multi lateral netting for three marks …i just wrote it reduces transaction costs and the number of transactions and then i wrote a disadvantage of it causing problems for subidiary if it doesnt recieve the cash payments immediately when it need cash ….would this give me 3 marks ?
I have not seen the exam, and although I will answer you this one time, I usually will not comment on the exam until I have seen it.
Poison pills are explained in our free lecture notes:
“Poison Pill tactics: the target builds in a tripwire to make itself less attractive. E.g. create a new class of stock which automatically becomes redeemable at a high price in the event of a take-over.”
So what you have written is not correct – they do not prevent a takeover, but they make things harder for the company taking over (which might mean they don’t bother taking over). However, don’t worry too much if it was only 2 marks.
With regard to the netting, what you have written seems OK and should get you at least 2 marks. The one advantage that you have missed is that rather than convert receipts and payments separately (at different exchange rates because of the spread) it will work out better just to convert the one net receipt or payment.