Definition of 'Poison Pill' A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make its stock less attractive to the acquirer. There are two types of poison pills:
1. A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount.
2. A "flip-over" allows stockholders to buy the acquirer's shares at a discounted price after the merger.
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