Hostile Bid

AAA

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.

RELATED TERMS
  1. Creeping Tender Offer

    A takeover strategy involving the gradual acquisition of the ...
  2. Game Theory

    A model of optimality taking into consideration not only benefits ...
  3. Tender Offer

    An offer to purchase some or all of shareholders' shares in a ...
  4. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  5. Proxy

    1. An agent legally authorized to act on behalf of another party. ...
  6. Poison Pill

    A strategy used by corporations to discourage hostile takeovers. ...
Related Articles
  1. Bonds & Fixed Income

    War's Influence On Wall Street

    Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common.
  2. Options & Futures

    Reverse Mergers: The Pros And Cons

    Reverse mergers can provide excellent opportunities for companies and investors, but there are still some downsides and risks.
  3. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  4. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  5. Credit & Loans

    In M&A how does an all-stock or all-cash deal affect the equity of the buying company?

    Mergers and acquisitions (M&A) are forms of corporate restructuring that are becoming increasingly popular in the modern business environment. The motive for wanting to merge with or acquire ...
  6. Fundamental Analysis

    How do you use Microsoft Excel to calculate liquidity ratios?

    Learn how to calculate the most common liquidity ratios in Microsoft Excel by inputting financial figures from a company's balance sheet.
  7. Investing Basics

    What is revenue cycle management?

    Learn more about revenue cycle management and why the healthcare industry in particular has adopted this payment process philosophy.
  8. Fundamental Analysis

    Is it important for a company always to have a high liquidity ratio?

    Understand the significance of the liquidity ratio and how it is used in conjunction with other measures to arrive at an overall evaluation of a company.
  9. Fundamental Analysis

    To what extent should you take a company's liquidity ratio into account before investing in it?

    Find out how important it is for an investor to know a company's liquidity ratio before deciding to invest, and why relying on one ratio can be dangerous.
  10. Fundamental Analysis

    How can a company quickly increase its liquidity ratio?

    Discover what high and low values in the liquidity ratio mean and what steps companies can take to improve liquidity ratios quickly.

You May Also Like

Hot Definitions
  1. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  3. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  4. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  5. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
  6. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The ...
Trading Center