Hostile Takeover Bid

AAA

DEFINITION of 'Hostile Takeover Bid'

An attempt to take over a company without the approval of the company's board of directors. When vying for control of a publicly-traded firm, the acquirer attempting the hostile takeover may proceed to bypass board approval in one of two ways typically.


First, the acquirer may attempt to buy enough shares of the company in order to acquire a controlling interest in the firm. Second, the acquirer may instead try to persuade existing shareholders to vote in a new board which will accept the takeover offer.

INVESTOPEDIA EXPLAINS 'Hostile Takeover Bid'

It is often difficult to acquire a controlling interest in a publicly-traded firm. Such a bid requires a large amount of capital and a good strategy to avoid bidding up the price too high. There are two main tactics employed to acquire a controlling interest. First, the acquirer may make a tender offer to the company's shareholders, pledging to buy shares of the company for a set price above the prevailing market price. Alternatively, an acquirer may wish to accumulate shares by buying directly in the market. However, this buying may cause a sharp increase in the stock price.


In either case, the acquirer must pay a premium over the market price to gain control over the firm.



RELATED TERMS
  1. Leveraged Buyback

    A repurchase of significant amount of shares through the use ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Unsolicited Bid

    An offer made by an individual, company or group of investors ...
  4. Self-Tender Defense

    A form of takeover defense against a hostile bid, in which the ...
  5. Kamikaze Defense

    A type of takeover defense mechanism sometimes resorted to by ...
  6. Takeover Artist

    An investor or company whose primary goal is to identify companies ...
RELATED FAQS
  1. Under what circumstances might a company decide to do a hostile takeover?

    A company may decide to attempt a hostile takeover if the target company's board of directors is not open to negotiations ... Read Full Answer >>
  2. How can a company buy back shares to fend off a hostile takeover?

    There are several reasons why a company may choose to repurchase some or all of the outstanding shares of its stock. This ... Read Full Answer >>
  3. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
  4. How does the level of mergers and takeovers in the Internet sector compare to the ...

    The level of mergers and takeovers in the Internet sector is higher than in the broader market. The Internet sector contains ... Read Full Answer >>
  5. What business structures expose entrepreneurs to unlimited liability?

    A company that seeks to expand through a horizontal integration can achieve economies of scale, economies of scope, increased ... Read Full Answer >>
  6. What are the benefits of investing in a money market fund?

    The U.S. Department of Justice, or DOJ, and the Federal Trade Commission, or FTC, use the Herfindahl-Hirschman Index, or ... Read Full Answer >>
Related Articles
  1. Home & Auto

    The Getty Oil Takeover Fiasco

    It was the largest takeover in history and one of the most dramatic. Learn all about the fate of Getty Oil.
  2. Mutual Funds & ETFs

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  3. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  4. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  5. Bonds & Fixed Income

    Trademarks Of A Takeover Target

    These tips can lead you to little companies with big prospects.
  6. Economics

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  7. Professionals

    Understanding Operations Management

    Operations management is concerned with converting materials and labor into goods and services as efficiently as possible to maximize profits.
  8. Investing

    American Airlines & US Airways Merger: It Matters!

    While the two airlines' merger creates a new giant in the industry and reduces choice for consumers and employees, investors should benefit.
  9. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  10. Investing Basics

    What are Ordinary Shares?

    Ordinary shares are any type of shares that are not preferred and don’t pay any type of predetermined dividend amount.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center