Greenmail
Term in finance / From Wikipedia, the free encyclopedia
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Greenmail or greenmailing is the action of purchasing enough shares in a firm to challenge a firm's leadership with the threat of a hostile takeover to force the target company to buy the purchased shares back at a premium in order to prevent the potential takeover.[1]
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The term is a financial neologism, coined in the 1980s, from blackmail and greenback as commentators and journalists saw the practice of corporate raiders as attempts by well-financed individuals, or their operating companies, to blackmail a company into handing over money by using the threat of a takeover.[2]
The greenmail strategy has evolved since its first practices with ways to counter greenmail, other variations of greenmail, as well as ways to reinforce a greenmail tactic. In the area of mergers and acquisitions, the greenmail payment is made in an attempt to stop the hostile takeover.[3]