This article has been written by Mridul Tewari, pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho and edited by Shashwat Kaushik.

It has been published by Rachit Garg.


Intellectual property today is an important part of almost all types of businesses. People rely on one or another type of intellectual property for the furtherance of their business and scientific interests. Copyrights, patents, trademarks, plant varieties, industrial designs, geographical indicators, integrated circuits and trade secrets are among the various kinds of intellectual property. People owning such intellectual property also need to ensure that their intellectual property is safeguarded and is not misused by someone else.

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What are trade secrets

A trade secret is any information about a business or organisation that is kept confidential and is not in the public domain. Sometimes, it may also happen that most of the people working in a particular business are not aware of such trade secrets and they are only known to a select few people in that business organisation.

For something to be a trade secret, it should adhere to the following:

  • Commercial or economic value: Such information or knowledge should have a commercial or economic value.
  • Known only to a select few: Such information or knowledge must only be known to a select few people.
  • Its secrecy is ensured: People having such information or knowledge should have taken measures to ensure its secrecy.

Any kind of knowledge, information, business technique or business process, formula or any method of doing business, manufacturing process, etc. can be considered a trade secret as long as it has economic or commercial value, is known only to a select few people and measures are taken by people knowing it to protect its secrecy.

Protection of trade secrets

Special emphasis is laid on maintaining the secrecy of trade secrets and their protection, as trade secrets set a business apart from its competitors and give it an edge over them. Some examples of well known trade secrets are Google’s search algorithm, Coca-Cola’s syrup formula, McDonald’s Big Mac Special Sauce, and KFC’s chicken recipe, among others. These well-known trade secrets are among the main reasons for the growth and success of these companies. Thus, the protection of trade secrets is of utmost importance for any business.

Unlike other forms of intellectual property, trade secrets are not registered anywhere and are protected until they are kept a secret, are not known to someone else or are acquired by someone else. 

Hostile takeovers

A company or business that gets acquired by some outsider or other company without the knowledge, consent or approval of its senior management and directors is termed a hostile takeover. The company that acquires is known as the acquirer and the company that acquires is known as the target company. All such takeovers that are done without the approval of the senior management and board of the target company and are against their wishes are hostile takeovers.

A few instances of hostile takeovers are listed in the table below:

Indian instancesForeign instances
Adani Group’s takeover of NDTV in 2022.Emami’s takeover of Zandu in 2008.Elon Musk’s takeover of Twitter in 2022.Sanofi-Aventis’s takeover of Genzyme Corporation in 2011.Oracle’s takeover of PeopleSoft in 2004.

Rationale behind hostile takeovers

There could be a multitude of reasons behind hostile takeovers, some of which are listed below:

  • A belief on part of the acquirer that the target company is undervalued and by taking it over, they could benefit in the future, or
  • It could also be a part of the strategy of the acquirer who wants to make changes in the management and operations of the target company, or
  • It could also be because the acquirer wants to know about the trade secrets of the target company, such as its method of doing business, manufacturing process,technology or some other secret knowledge.

Anti-takeover provisions

The trade secrets of any business are at risk of being revealed to acquirers and outsiders in the event of a hostile takeover. To prevent outsiders from taking over the management of their business and to protect their well kept trade secrets, target companies make use of certain defence tactics. Anti-takeover provisions are defence tactics that are used by target companies to prevent their hostile takeovers.

Some commonly used anti-takeover provisions by target companies to prevent their hostile takeover are Staggered Boards, Poison pills, White knights, Pacman techniques, etc. Some of them are discussed below.

Staggered Board Technique

The staggered board technique, also called “classified board,” is when the directors on the board of the target company are given different terms or are classified into “classes”. All the directors do not retire at the same time and only a few directors of a “class” retire while the rest continue. If the target uses this defence tactic, then it would not be possible for the acquirer to get control over the board of the target in a single meeting, and the acquirer would thus be unsuccessful in taking over the target company.

Poison Pill Technique

The poison pill, as is evident from its name, is a technique that makes the target unattractive to be acquired and the acquirer would not want to “take the poison pill”. This technique gets implemented after the acquirer has acquired the shares of the target company above a given threshold. This threshold is also known as the trigger event. After this threshold limit is breached by the acquirer, the existing shareholders of the target company purchase additional shares of it at a discounted price, i.e., less than the market price, due to which the ownership of the acquirer in the target company dilutes. This makes the hostile takeover more complex and unattractive for the acquirer. This tactic, due to its nature, is also called the shareholder rights plan.

The implementation of the poison pill also gives the target company an opportunity to negotiate with the acquirer and both of them may negotiate for a much better price as well as conditions favourable to them.

White Knight

White Knight refers to a person who comes for someone’s rescue. In relation to hostile takeovers, it refers to another friendly acquirer who rescues the target company from a hostile takeover. The White Knight co-operates with the board of the target company, negotiates better terms and prices, is in alignment with the interests of the target and is more favoured by the target’s board and owners. This technique is more of a strategic merger than an acquisition, used to save the target from hostile takeover with the aid of a friendly acquirer. Thus, through such a friendly acquisition, the interests of the stakeholders are protected and business operations also run smoothly. This technique is suitable for small corporations and startups, where they seek the help of a friendly company.

Pacman Technique

This defence technique derives its name from a popular Japanese video game known as “Pacman”, in which the objective was to eat up all the bubbles in the maze and also avoid getting eaten up by the ghosts. The Pacman technique is quite similar to the game, where the target company, while avoiding its holistic takeover by the acquirer, also makes an attempt to acquire the acquirer company. Using this technique, the target company becomes aggressive, which puts the acquirer in a vulnerable situation, forcing the acquirer to become defensive.

When the Pacman technique is employed and the acquirer company becomes defensive, it may negotiate with the target company for better terms or it may drop the idea of acquisition altogether. The Pacman technique is not used very commonly as it may require a lot of finances to make a bid for the acquirer’s acquisition. Also, this technique is more suitable for big corporations that have financial backing.

The list of these anti-takeover provisions is not exhaustive and there may be many other anti-takeover provisions depending on the jurisdiction, applicable laws and common practices. But, whatever anti-takeover provision is employed, it helps in the protection of the target company, its interests as well as those of its stakeholders and most importantly, its intellectual property and trade secrets. 

Provisions in India

India is an emerging market economy where a lot of businesses operate across various industries and there are chances of hostile takeovers. The anti-takeover protections in Indian law are listed below:

There is also a provision in the Companies Act, 2013 for the appointment of independent directors. Independent directors are directors who are not whole-time directors and keep a check on the proper governance of the company. They may oversee any hostile takeover attempt and may use preventive measures.

Apart from the above mentioned provisions in Indian law, a company may also use any other defence strategy that suits its interests and prevents a hostile takeover. 

Provisions in the US

The US is a federation, where the Congress (the federal legislative body) and the state legislatures make their own laws. In the US, there are different laws pertaining to anti-takeovers both at the federal and state levels.

  • The Williams Act is a federal law that deals with public corporations. It is enacted to regulate tender offers and disclosure requirements during the acquisition of public corporations. It ensures that shareholders of such corporations are provided with all the material information during acquisitions. This may help prevent hostile takeovers. 
  • The General Corporation Law of Delaware State is a state level law of Delaware State in the US. It has provisions in it that allow corporations to adopt anti-takeover defence tactics in the case of hostile takeovers. 
  • The US Securities and Exchange Commission, which regulates the securities markets in the US, has the Securities Exchange Act of 1934, which deals with various takeover related issues and anti-takeover measures.

Case law related to anti-takeover measures also forms an important source of how the anti-takeover measures are interpreted by the US courts, and the US Securities and Exchange Commission also comes up with various rules regarding anti-takeovers from time to time.

Convergence and challenges: navigating the crossroads

Synergy between trade secret protection and anti-takeover provisions: Although seemingly distinct, trade secret protection and anti-takeover measures often intersect. This section explores the synergies between these two corporate strategies, highlighting how the preservation of proprietary information contributes to a company’s ability to resist hostile takeovers.

Global perspectives: Trade secrets and anti-takeover provisions are subject to diverse legal frameworks across jurisdictions. This section provides a comparative analysis of global approaches, exploring how cultural, legal, and economic factors shape the implementation of these strategies on the international stage.

Emerging trends: The landscape of trade secret protection and anti-takeover provisions is continually evolving. This section identifies emerging trends, including the impact of artificial intelligence on trade secrets, the role of environmental, social, and governance (ESG) factors in anti-takeover decisions, and the influence of international regulatory developments.


Anti-takeover measures thus play a very important role whenever the target company wants to prevent its hostile takeover. Hostile takeover is never beneficial for the interest of any company as it leads to a change in its management and operations, the long term goals of the business are not fulfilled and there is always a risk of the trade secrets of the company being exposed to the public and outsiders. Thus, it is very important for the management of any company to be aware of different anti-takeover provisions and to know when to employ them. 

Also, if countries want businesses to grow and investments to flow in, they should ensure that there is fair competition among the various players in the market. They should also enact laws with adequate provisions dealing with takeovers and hostile takeover protection mechanisms.


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