2014 Poison Pill Impetus: Why are U.S. companies adopting poison pills?

An analysis of last year's U.S. poison pill adoptions reveals that companies continue to primarily adopt them for a specific reason, including in response to unsolicited acquisition offers and activist investors as well as protecting net operating loss (NOL) carryforwards .

In 2014, 57 poison pills were adopted by 54 distinct U.S. incorporated companies. Only 13 of the companies adopted what we would categorize as a routine adoption: those adopted before any publicly disclosed threat has emerged or for the specific purpose of protecting tax assets. NOL protective poison pills represented the largest proportion of 2014 adoptions.

The 18 NOL poison pills adopted in 2014 is a three-year high and are tied for the third most such adoptions in any year since 1998, the first year in which we are aware of any U.S. company adopting a poison pill in order to preserve NOLs.

Poison pills adopted in response to the company being approached by an activist investor or a rapid share accumulation represented over a quarter of all adoptions.