scorched earth

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Scorched Earth Policy

An antitakeover measure in which a company sells many or all of its "good" or desirable assets and/or issues an extraordinary amount of debt. A scorched earth policy is designed to make the company less attractive to potential acquirers. The obvious disadvantage to a scorched earth policy is the possibility that, even if the company remains independent, it may have acquired so many liabilities that it may not be able to maintain its operations easily. See also: Poison pill, Suicide pill.

scorched earth

An antitakeover strategy in which the target firm disposes of those assets or divisions considered particularly desirable by the raider. Thus, by making itself less attractive, the target discourages the takeover attempt. Such a strategy is almost certain to penalize the shareholders of the target firm. Compare crown jewel.