Reviewed by Oct 05, 2020| Updated on
In the context of mergers and acquisition, killer bees are individuals or companies that help a company to avoid a hostile takeover. White knights are similar to killer bees, but the latter uses a wide-variety of takeover defense strategies. The intensity of the term 'killer bees' comes from the aggressive actions they take for defense.
A killer bee can be anyone, such as an individual, an attorney, a law firm, an accountant, a consulting firm, or an investment bank. The sole purpose of a killer bee is to lay down and implement a plan that helps the target company to stand against a hostile takeover attempt.
Killer bees work towards either making the takeover target company difficult or expensive to acquire or portray the company such that the potential acquirer finds it unattractive and lose interest in pursuing the takeover.
*1. Pac-Man Defense: * This is an aggressive takeover defense strategy in which the target company tries to turn the tables on its potential acquirer. The acquirer might try to buy enough shares to gain control over the target company. The target company follows the same strategy of buying stocks of the potential acquirer to gain controlling interest over the acquiring company.
When the potential acquirer faces the threat of losing control over itself, the acquirer may step back and leave the takeover attempt midway.
2. People Poison Pill: The second extreme strategy a killer bee may take up is advising the target company to modify the corporate charter to ask for the resignation of all key managing executives in the event of a hostile takeover. That is if all the key members who are vital for the target company's success resign, the acquiring company will not have any reason to pursue the takeover.