Hostile Bid

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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.

INVESTOPEDIA EXPLAINS '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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