Hostile Takeover Bid

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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.

BREAKING DOWN '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.



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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 long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  3. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>
  4. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  5. Are companies with high Book Value Of Equity Per Share (BVPS) takeover targets?

    Companies with high book value of equity per share (BVPS) can be good takeover targets if those companies are public and ... Read Full Answer >>
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