This paper documents a novel agency cost that arises because managers of potential takeover targets forgo merger opportunities in industry merger waves. We present comprehensive evidence that the entrenchment effect of classified board varies dynamically over time by industry. While the effect is strongly economically significant in years when industries are undergoing a synergistic merger wave, it is muted in years when synergistic industry M&A activity subsides. In wave industry-years, firms without classified board are more than three times as likely to receive a takeover bid compared to firms with classified board. This difference is even larger for less anticipated waves and for firms that also have a high level of takeover protection based on the GIM index of Gompers, Ishii, and Metrick (2003). By contrast, the difference in takeover odds is an order of magnitude smaller and not statistically significant in non-wave industry-years. These results are driven by economic, technological, and regulatory shocks that create economic opportunities to merge in the industry. Overall, our evidence broadens the classical agency view and suggests that the agency cost of classified boards varies significantly over time.