# Killer Bees

![Killer Bees](https://www.investopedia.com/thmb/7-7wQXVXMqMYDk9sJrE2Zcw7wnI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/killerbees.asp-final-1-f53be3d998f64820ba97674ef1ecc71e.png)

*— Investopedia / Joules Garcia*

## What Are Killer Bees?

Killer bees are companies or individuals_—_such as investment bankers, accountants, attorneys, and tax specialists_—_that help [target firms](https://www.investopedia.com/terms/t/targetfirm.asp) avoid being taken over by an unwanted suitor. Their job is to devise and implement [anti-takeover](https://www.investopedia.com/terms/a/anti-takeovermeasure.asp) defense strategies, which generally consist of making the target less attractive or more difficult or costly to acquire.

### Key Takeaways

*   Killer bees are companies or individuals that help target firms avoid being taken over.
*   Their job is to devise anti-takeover defense strategies that make the target more difficult or costly to acquire.
*   Killer bees rose to prominence during the 1980s when corporate America came under attack from opportunistic investors known as raiders.
*   The strategies killer bees employ are often controversial, frequently questioned by shareholders, and risk being overturned by the courts.

## Understanding Killer Bees

When a company targets another one for acquisition, it will usually first approach its [board of directors](https://www.investopedia.com/terms/b/boardofdirectors.asp). If rebuffed, the acquirer could then return with a better bid, walk away, or seek to bypass management by initiating a [tender offer](https://www.investopedia.com/terms/t/tenderoffer.asp) directly to shareholders.

Should takeover advances turn unfriendly or [hostile](https://www.investopedia.com/terms/h/hostiletakeover.asp), killer bees may be brought on board. Their job is to come up with feasible ways to make life uncomfortable for the prospective buyer, similar to how their namesake stings its victims when provoked until they back off and go away.

Killer bees rose to prominence during the 1980s hostile takeover craze. Back then, a category of investors with deep pockets, known as [raiders](https://www.investopedia.com/terms/r/raider.asp), began buying [undervalued](https://www.investopedia.com/terms/u/undervalued.asp) companies and then controversially dismembering them to bag a quick profit. Corporate America wasn't used to this type of behavior and enlisted the help of specialists to defend against these attacks.

Killer bees would present a series of options to the target's board based on its individual circumstances and the characteristics of the company seeking to buy it. To foil a hostile takeover attempt, they generally aim to make the prey either too expensive to [acquire](https://www.investopedia.com/terms/a/acquisition.asp) or so unattractive that the predator loses interest.

## Killer Bees Methods

Following the 1980s, defensive measures known as [shark repellents](https://www.investopedia.com/terms/s/sharkrepellent.asp) were devised to discourage unfriendly takeover attempts. Popular strategies that killer bees use include:

*   [**Flip-In Poison Pill**](https://www.investopedia.com/terms/f/flip-in-poison-pill.asp): Existing shareholders are granted the right to purchase additional shares at a discount, thereby [diluting](https://www.investopedia.com/terms/d/dilution.asp) the ownership interest of the hostile party and making it harder and more costly for it to gain control. 
*   [**White Knight**](https://www.investopedia.com/terms/w/whiteknight.asp): A friendly company steps in to purchase the target on the verge of being taken over.
*   **[Pac-Man](https://www.investopedia.com/terms/p/pac-man-defense.asp):** Named after the classic eat-or-be-eaten arcade game, the target company turns the tables on the acquirer by making a takeover bid for it.
*   [**Lobster Trap**](https://www.investopedia.com/terms/l/lobstertrap.asp): A provision is passed prohibiting any shareholder with an ownership stake of more than 10 percent from converting [convertible securities](https://www.investopedia.com/terms/c/convertible-security.asp) into voting stock, thus preventing large shareholders from gaining enough votes to force the board to accept the merger.
*   [**Poison Put**](https://www.investopedia.com/terms/p/poison-put.asp): A bond is issued that investors can redeem in full before its [maturity date](https://www.investopedia.com/terms/m/maturitydate.asp).

Litigation, such as [standstill agreements](https://www.investopedia.com/terms/s/standstill_agreement.asp), might also be used to delay any takeover.

## Criticism of Killer Bees

Many of the anti-takeover defense strategies that killer bees utilize don't sit well with shareholders. Making the target less attractive or more expensive to buy generally has a habit of eroding [shareholder value](https://www.investopedia.com/terms/s/shareholder-value.asp) and potentially crippling the company for years to come.

The drastic nature of some of these measures, and the frequent inability of regular shareholders to vote on them, has led their legality to be questioned. Not all hostile bidders plan to make a quick buck and ruin companies and, in some cases, being taken over by one of them could be more beneficial from a financial standpoint for existing investors.

> **Important**
>
> The strategies killer bees employ are often controversial and not always favorable to shareholders, prompting the courts to occasionally intervene.

## Limitations of Killer Bees

Over the years, these observations have led the courts to occasionally block companies from employing anti-takeover measures, if they are deemed to be unreasonable. The prospect of intervention from higher powers inevitably means that it is now much harder for killer bees to deliver on their mandates.

> **Article Sources**
>
> 1.  Investor.gov. “[Tender Offer](https://www.investor.gov/introduction-investing/investing-basics/glossary/tender-offer).”
>     
> 2.  Lipton, Martin. “[Twenty-Fice Years After Takeover Bids in the Target’s Boardroom: Old Battles, New Attacks and the Continuing War](https://deliverypdf.ssrn.com/delivery.php?ID=292084092121075087066005070065118119035088025016027009096003125075095024075008070010062032061034008009023112025102097125092068047091011052051102118124126099125103031001062055024115100095098081020003096113002071031106000068024010000000094082013024078083&EXT=pdf&INDEX=TRUE).” _American Bar Association_, vol. 60, no 4, August 2005, pp. 1371.
>     
> 3.  Shah, Chirag. “[A Review of Defensive Strategies Used in Hostile Takeovers](https://scholarworks.wmich.edu/cgi/viewcontent.cgi?article=3133&context=honors_theses).” _Western Michigan University_, 1996, pp. 13-22.
>     
> 4.  Rock, Edward. “[Securities Regulation as Lobster Trap: A Credible Commitment Theory of Mandatory Disclosure](https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1642&context=faculty_scholarship).” _Cardozo Law Review_, vol. 23, no. 02-05, 2002, pp. 700.
>     
> 5.  Lipton, Martin. “[Twenty-Fice Years After Takeover Bids in the Target’s Boardroom: Old Battles, New Attacks and the Continuing War](https://deliverypdf.ssrn.com/delivery.php?ID=292084092121075087066005070065118119035088025016027009096003125075095024075008070010062032061034008009023112025102097125092068047091011052051102118124126099125103031001062055024115100095098081020003096113002071031106000068024010000000094082013024078083&EXT=pdf&INDEX=TRUE).” _American Bar Association_, vol. 60, no 4, August 2005, pp. 1370-1373.
>     
> 6.  Harvard Law School Forum on Corporate Governance. “[Takeover Law and Practice: Current Developments](https://corpgov.law.harvard.edu/2023/05/03/takeover-law-and-practice-current-developments/https:/corpgov.law.harvard.edu/2023/05/03/takeover-law-and-practice-current-developments/).”