Premium Raid

AAA

DEFINITION of 'Premium Raid'

An attempt by a corporate raider or acquiring company to procure a large block of shares in a target company, by offering its shareholders a significant premium over the current market value of their shares. This tactic is most likely to be used in a hostile takeover situation, where the acquiring company prefers to bypass the target company's management and take its offer directly to the shareholders.

INVESTOPEDIA EXPLAINS 'Premium Raid'

The ultimate objective of a premium raid for a corporate raider or acquirer is to gain effective control of the target company. In certain cases, a premium raid can prove to be quite costly for the acquiring company. This may occur if the premium offered to the target company's shareholders is too high (a situation that may arise if the target is in a hot sector), or if the acquirer is forced into a bidding war with another bidder or a white knight who has the support of the target company's management.

RELATED TERMS
  1. Takeover Artist

    An investor or company whose primary goal is to identify companies ...
  2. Corporate Raider

    An investor who buys a large number of shares in a corporation ...
  3. White Knight

    A white knight is an individual or company that acquires a corporation ...
  4. Greenmail

    An antitakeover measure that arises when a large block of stock ...
  5. Acquisition Premium

    The difference between the estimated real value of a company ...
  6. Hostile Takeover

    The acquisition of one company (called the target company) by ...
RELATED FAQS
  1. What is the Pac-Man defense?

    The Pac-Man defense is a strategy in which a company that is facing a hostile takeover from another company essentially turns ... Read Full Answer >>
  2. What is a staggered board?

    A staggered board of directors (also known as a classified board) is a board that is made up of different classes of directors. ... Read Full Answer >>
  3. Why should management teams focus more on horizontal integration?

    Management teams should focus more on horizontal integrations because they allow for economies of scale, economies of scope, ... Read Full Answer >>
  4. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    The terms "merger" and "acquisition" are used together because they both describe processes by which two companies become ... Read Full Answer >>
  5. What level of mergers and acquisitions is common in the chemical sector?

    The level of mergers and acquisitions (M&As) in the chemicals sector has surged to an all-time high since the turn of ... Read Full Answer >>
  6. 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 >>
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Options & Futures

    Bloodletting And Knights: Medieval Investment Terms

    From bloodletting to ye olde black knights, things on Wall Street are getting downright medieval!
  3. Mutual Funds & ETFs

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  4. Economics

    What are Pork-Barrel Politics?

    Pork-barrel politics is a form of patronage whereby politicians favor their constituents in exchange for benefits such as campaign donations and votes.
  5. 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.
  6. 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.
  7. Fundamental Analysis

    Explaining Enterprise Multiple

    The enterprise multiple is a ratio used to value a company as if it was going to be acquired.
  8. Chart Advisor

    3 Basic Material Stocks Poised For A Pop

    After large market swings such as the one seen on March 30, 2015, it is not surprising to see traders become more tolerant towards taking on risk.
  9. Investing

    Wizards Of Odd: A Trip To Tech Land

    I spent a couple of days in Silicon Valley, and here are some key lessons I learned after meeting with a number of tech CEOs and venture capitalist.
  10. Stock Analysis

    Will Kraft-Heinz Be a Winner?

    Kraft and Heinz are now one. This should present a profitable long-term investment opportunity, but isn't likely to be smooth sailing at first.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center