Flip-Over

A provision in a poison pill that gives shareholders the right to buy the company’s shares (or the shares of the surviving company after a merger) at half price. Unlike a Flip-in, a flip-over right does not become effective simply because an interested shareholder buys some stock. Usually it becomes effective when (i) there is an interested shareholder and (ii) the company engages in certain transactions with the interested shareholder or an affiliate, such as a merger or a sale of all or a large part of its assets. Historically, the flip-over poison pill was devised several years before the more powerful flip-in. At that time the essential discrimination against the interested shareholder that the flip-in entails was widely considered illegal. Now the two are generally combined, although under most circumstances the flip-in provision of the pill dominates any potential bidder’s attention.

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