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defensive acquisition business definition
A firm or an asset purchased by a potential target of a takeover in order to make itself less desirable to raiders. For example, a target company might purchase another firm engaged in the same business as the raider in order to create an antitrust problem for the raider. See also raider, target company.
Case Study In late 2006, French electronic equipment manufacturer Schneider Electric agreed to pay $6.1 billion for American Power Conversion, a U.S. manufacturer of power supplies for electronic gear. Schneider's CEO said the acquisition was part of the firm's strategic plan, but many investors believed Schneider Electric paid too high a price for the U.S. firm. At $31 per share, the purchase price was 30% above APC's market price immediately prior to the offer and nearly double its price of two months earlier. It turned out that several months before the agreement to purchase APC, three private equity firms had expressed an interest in acquiring Schneider. Thus, while Schneider's acquisition of American Power Conversion may have been part of the firm's strategic plan, it was also a defensive acquisition that made it less likely Schneider itself would become the target of another firm.
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