How to Stop a Corporate Merger

Many different people can stop a corporate merger. Those on the board of directors can stop a merger if they believe it is bad for the corporation. Shareholders can stop a merger they don't like by voting against it, or even by suing the directors of the corporation.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Stock in the company (or an official position within the corporation)

Prevent a Corporate Merger From the Boardroom

1. Vote against the proposed merger when you are a director on the corporation's board. Corporate voting laws vary, depending on the state in which your corporation is incorporated, but most states require board approval for major mergers.
2. Discuss the merger with other members of the board of directors and ask them to vote against the merger, too. When a majority of the board members present at the meeting vote against a merger, it is stopped.

Stop the Transaction as a Shareholder

3. Attend the shareholder's meeting and vote against the proposed merger.
4. Try to fire the director or officer who is advocating the merger. Shareholders can fire directors through voting when the director can be shown to be acting against the best interests of the corporation.
5. Purchase enough shares to become the controlling shareholder. Typically, shareholder voting power is dependent on how many shares they own. The more you own, the more power you will have to vote to stop a merger.

Make Your Private Corporation Unappealing to Raiders

6. Amend your articles of incorporation to include a "poison pill." A poison pill provision gives existing shareholders the right to acquire a huge number of new shares in the company if any one person or company amasses more than a set percentage of stock. This will dilute the percentage of shares an outside company can obtain, so that they cannot get control of the company through an unwanted merger.
7. Take on a new debt or set of debts to make the projected short-term profit margin for your company unappealing to a corporate raider.

Tips & Warnings

• If you can't attend the shareholder's meeting in person, you can vote against a merger by mailing in a proxy. The proxy form will be sent to you when you are notified of the shareholder meeting.
• Keep in mind that directors and managers owe duties of loyalty and care to the corporation. Therefore, if you seek to stop a merger as an officer of the corporation, you may be subject to liability if you are not acting in the best interests of the corporation.