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. 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 >>
  2. How can a company buy back shares to fend off a hostile takeover?

    Learn about why a business might use a stock buyback to thwart a hostile takeover attempt by reducing its total assets and ... Read Answer >>
  3. How can a company resist a hostile takeover?

    Learn about some of the defense strategies a public company's board of directors might employ to prevent a hostile bidder ... Read Answer >>
  4. What happens to the shares of stock purchased in a tender offer?

    Learn what a tender offer is, whether it is a good idea to accept a tender offer and what happens to the shares of stock ... Read Answer >>
  5. What usually happens to the price of a stock when a tender offer for shares of the ...

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