Jonestown Defense

In 1978, a cult leader named Jim Jones convinced his following that their compound in Guyana was about to be raided by the feds. In response, all 900+ residents of Jonestown drank a bunch of poisoned punch and died. Most did it voluntarily, but some had to be coerced. This isn’t a warm and fuzzy story by any stretch, but it does set the table nicely for our discussion of Jonestown defenses, since this incident is what gave them their catchy name.

When a company engages in a Jonestown defense, it’s basically saying that it would rather die than be taken over by a would-be acquirer. Not only does the company say it, but it also takes measures to, uh...make it so. This goes beyond the typical strategies an organization engages in to avoid takeover, like white knights and poison pills, and ventures into territory that may very well end up tanking the company for good. That’s why a Jonestown defense is also called a suicide pill.

So what are we talking about here? We’re talking about taking on enormous amounts of debt, like to the point of insolvency. We’re talking about massive share buybacks. Selling off physical and intellectual property. Severing ties with other organizations, like vendors and suppliers. Laying off the workforce. The point is to make the company so unappealing that the wannabe acquirer will be totally turned off and lose interest. If the business goes under in the meantime, then so be it. Somebody pass the Kool-Aid.