Definition of Greenmail:
The practice of buying enough shares in a company to threaten a takeover, forcing the owners to buy them back at a higher price in order to retain control.
Forcing a firm to buy its own stock (shares) at an inflated price, to ward off a corporate raider who holds enough stock to pose a hostile takeover threat. It is a type of blackmail (which, in the US, calls for a lot of greenbacks the nickname for US dollars) that nets a raider a handsome profit just for creating a takeover threat.
Like blackmail, greenmail is money paid to an entity to stop or prevent aggressive behavior. In mergers and acquisitions, it is an anti-takeover measure in which the target company pays a premium, known as greenmail, to purchase its own shares back at inflated prices from a corporate raider. After accepting the greenmail payment, the raider generally agrees to discontinue the takeover and not buy any more shares for a specific time.
Greenmail is the practice of buying enough shares in a company to threaten a hostile takeover so that the target company will instead repurchase its shares at a premium. Regarding mergers and acquisitions, the company makes a greenmail payment as a defensive measure to stop the takeover bid. The target company must repurchase the stock at a substantial premium to thwart the takeover, which results in a considerable profit for the greenmailer.
How to use Greenmail in a sentence?
- The target company can resist the takeover attempt by repurchasing its shares at a premium from the greenmailer.
- Anti-greenmail provisions, laws, regulations, and taxes made greenmail more difficult after the 1980s.
- Greenmail became more frequent and controversial during the 1980s.
- Greenmail is a practice whereby a greenmailer buys up a substantial block of a company's shares and threatens a hostile takeover.
- Critics see greenmail as a predatory practice similar to extortion, but it can be defended as a free-market solution to disputes between shareholders.
- I was acquiring businesses through leveraged buyouts and greenmail which with more forethought I would have left well alone.
Meaning of Greenmail & Greenmail Definition