A firm may decide to eliminate the threat of a takeover by a major shareholder by purchasing shares from him at a premium also known as a(n) ________.
A) open market purchase
B) tender offer
C) targeted repurchase
D) greenmail

Question

Quizplus · Accepted Answer

Greenmail refers to the strategy where a firm buys back shares at a premium from a potential acquirer (usually a significant shareholder threatening a takeover) to eliminate the threat of the takeover. This is done without offering the same premium to other shareholders.

A Firm May Decide to Eliminate the Threat of a Takeover