Investing for Beginners , investing

A greenmail is one of the strategies used to avoid hostile takeover. Greenmail is used when significant stake of an acquisition target is held by hostile company which tries to overtake the control of company targeted for acquisition. Greenmail is an offer of a targeted company to acquirer (who holds the stake) to buy that stake back paying a premium price over stake holders costs. 

Greenmail may be effective against hostile takeover but it may cost a lot funds for target’s shareholders and be executed only because company’s management wants to save their job places.