'Crown jewel' strategy for prevention of takeover bids is not a successful tool in Indian context. Comment.

The central theme in such a strategy is the divestiture of major operating unit most coveted by the bidder-commonly known as the 'crown jewel strategy'. Consequently, the hostile bidder is deprived of the primary intention behind the takeover bid. A variation of the 'crown jewel strategy' is the more radical 'scorched earth approach'. Vide this novel strategy, the target sells off not only the crown jewel but also properties to diminish its worth. Such a radical step may however be, self-destructive and unwise in the company's interest. However, the practice in India is not so flexible. The Companies Act, 2013 lays down certain restrictions on the power of the Board with respect to sale of undertaking, without obtaining the permission of the company in a general meeting. However, the SEBI (Substantial Acquisitions and Takeover) Regulations, it will be difficult for any target company to sell, transfer, encumber or otherwise dispose of or enter into an agreement to sell, transfer, encumber or for dispose of assets once the predator has made a public announcement. Thus, the above defense can only be used before the predator/bidder makes the public announcement of his intention to take over the target company.