Hostile Bid

DEFINITION of 'Hostile Bid'

A specific type of takeover bid that is presented directly to the target firm's shareholders because the target's management is not in favor of the deal. A hostile bid is usually presented through a tender offer, under which the acquiring company offers to purchase the common shares of the target at a substantial premium. Simply put, a hostile bid is the bid offered in a hostile takeover.

BREAKING DOWN 'Hostile Bid'

Hostile bids can mean major changes for the organizational structure. Despite target management objections, shareholders face a situation similar to a prisoners' dilemma, where only those that accept the tender are guaranteed to enjoy the premium price. If the board pursues defensive action to stop the merger, a proxy fight can occur where the acquirer will often attempt to convince the target shareholders to replace management.

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RELATED FAQS
  1. Under what circumstances might a company decide to do a hostile takeover?

    Learn about why companies use a hostile takeover to gain control of another company, and understand the different methods ... Read Answer >>
  2. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Learn why it may often be in the best interest of a shareholder to accept a tender offer made at a premium to the market ... Read Answer >>
  3. How is a tender offer used by an individual, group or company seeking to purchase ...

    Learn how tender offers are used in takeover attempts, and understand the difference between a hostile takeover and a friendly ... Read Answer >>
  4. What's the difference between a merger and a hostile takeover?

    Understand the difference between a merger and a hostile takeover, including the different ways one company can acquire another, ... Read Answer >>
  5. What is the difference between a hostile takeover and a friendly takeover?

    Learn about the difference between a hostile takeover and a friendly takeover, and understand how proxy fights and tender ... Read Answer >>
  6. What happens to the shares of a company that has been the object of a hostile takeover?

    Learn about the effect on the share price of companies that are targets of hostile takeovers, which are tactics used by famed ... Read Answer >>
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