Scorched earth

: This article is about the military strategy. See Scorched Earth (computer game) for the computer game.

Business

The scorched-earth defense is a form of risk arbitrage and anti-takeover strategy. When a target firm implements this provision, it will make an effort to make it unattractive to the hostile bidder. For example, a company may agree to liquidate or destroy all valuable assets, also called "crown jewels", or schedule debt repayment to be due immediately following a hostile takeover. In some cases, a scorched-earth defense may develop into an extreme anti-takeover defense called a "suicide pill".

Related Topics:
Risk arbitrage - Takeover - Firm - Crown jewels - Debt - Suicide pill

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One such case is the anti-sales tactic taken by American video rental chain Blockbuster. Rather than sell off excess stock or donate it to libraries, charities, and the like, store representatives are ordered to "field destroy" all merchandise that is of no further use to the company. This practice prevents others from benefiting from the items in question without patronizing the company. The items can be toys, DVDs or promotional goods.

Related Topics:
Video - Rental - Chain - Blockbuster - Toy - DVD

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