A poison pill defense is a strategy employed by a company to prevent a hostile takeover. It is used when a potential acquirer owns a large portion of a company's outstanding shares. A poison pill strategy allows existing shareholders (but not the potential acquirer) to purchase additional shares at a discounted price, thereby diluting the value of the potential acquirer's shares. To control a significant portion of the company again, the potential acquirer would have to spend more money purchasing shares, making the attempted takeover more expensive.