The poison pill, which has so far successfully been used by the corporates as an effective strategy to counter hostile takeover bids, is now losing its charm among the corporates. But given the striking absence of powerful alternative anti takeover strategies, it may not be the end of poison pill.

As a defense against Microsoft's unsolicited takeover bid of rival Yahoo, the management of Yahoo had put into place a severance plan, which would guarantee certain benefits to the employees in case they lose their jobs or resign `for good reason'. However, billionaire corporate raider, Carl Icahn, had challenged Yahoo's `Poison Pill' in a Delaware Court. While Sunnyvale-based, Yahoo Inc., maintained that the plan would ultimately cost a potential acquirer anywhere between $500 mn and $800 mn, New York-based investor, Icahn, had put that figure at $2.4 bn, which he also cited as an acquisition deterrent. Icahn said that if he succeeded in his efforts to replace the board, the severance/retention plan would be dismantled.

This move by Yahoo is a typical case of a poison pill. This strategy has been adopted by global corporations to throttle hostile takeover attempts by other companies or by corporate raiders. Since the last two and a half decades, the poison pill strategy has been widely and successfully adopted by global corporates to prevent hostile takeovers and to augment shareholders' wealth. However, in recent times, despite growing number of hostile deals, global poison pills that are in force have declined steadily. Growing shareholders' activism against poison pills is also prompting large corporates to shed their poison pill plans.

According to a study by Shearman & Sterling, a New York-based law firm, the number of Fortune 100 companies with poison pills had declined from 33 in 2004 to a mere 12 by 2008. Further, many Japanese companies have abandoned poison pills during the last two years. Some of them include Shiseido, the oldest cosmetics company in the world, and e-Access, the Internet service provider, which followed the trend in 2008. According to a report by Thompson Reuters Strategic Research, as on March 31, 2008, there were 1,320 pills in force, down by nearly 12% from September of the previous year. Companies are now letting their plans expire at a quicker pace instead of adopting new plans or renewing existing ones.

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