Suddenly, acquirers like poison pills

Believe it or not, it looks like buyers in M&A deals have had a change of heart over poison pills.

Typically, these prickly agreements prevent hostile bidders from going after a company they covet, but lawyers from Paul, Weiss have pointed out there is talk in legal circles about more acquirers using them to their advantage.

The issue is particularly fresh in Canada because steel giant ArcelorMittal asked Baffinland Iron Mines to re-implement its pill when negotiating with the board of directors. And south of the border, Dell asked Compellent Technologies to adopt a shareholder rights plan as a condition of its acquisition just last month.

But the reasons may differ on both sides of the border. In the Baffinland deal, ArcelorMittal was trying to block a competing bid from Nunavut Iron Mines (who, in the end, became a partner). In the U.S., acquirers may simply try to rule out hedge fund influence rather than fully block another bid, said lawyer Ariel Deckelbaum.

Unlike in Canada, these funds thrive in the U.S. and exert a lot of influence. If one owns shares of a target company and doesn't like the deal, sometimes they will do all they can to kill it. To prevent that from happening, Mr. Deckelbaum said more acquirers may ask for pills to block these players out.

In general, poison pills have gotten a lot of attention in the U.S. of late. The Delaware court is currently deciding a case involving packaged-gas company Airgas Inc., which some say has had its pill in place for far too long in the face of a takeover bid from Air Products. Many lawyers will be watching the outcome of this case to predict how pills will be treated in the future.