Scorched-earth defense

The scorched-earth defense is employed by a takeover target when it sells off its most valuable assets in order to reduce its value. The firm may also take on a substantial amount of debt. By taking these actions, the organization hopes to make itself a less attractive acquisition target. Even when this defense succeeds, it may seriously impair the long-term competitiveness and earning ability of the target company, which reduces the value of the business for its shareholders.

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Mergers and Acquisitions