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. Hostile Takeover

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

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

    The difference between the estimated real value of a company ...
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. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Tender offers for share buybacks are often made at a premium to the current market price; it may be in an investor’s best ... Read Full Answer >>
  4. How is a tender offer used by an individual, group or company seeking to purchase ...

    A tender offer is made directly to shareholders in a publicly traded company to gain enough shares to force a sale of the ... Read Full Answer >>
  5. Why would it be in the interest of shareholders to accept a tender offer?

    It would be in the best interests of shareholders to accept a tender offer if it is well above the current market price – ... Read Full Answer >>
  6. How does a company record profits using the equity method?

    A company that invests in another company and has majority control of it would record profits using the equity method. 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. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  5. Economics

    What are Deliverables?

    Deliverables is a project management term describing an object or function that must be provided or completed by a certain due date.
  6. Investing

    How To Profit From M&A Announcements

    We look at four strategies that seek to profit from merger and acquisitions announcements.
  7. Stock Analysis

    The CVS Target Deal: A Healthy Union?

    The CVS Health and Target deal should be a win for both. Here's an analysis with a twist.
  8. Investing News

    Most Important Mergers And Acquisitions Of 2015

    Nearly halfway through the year, 2015 is proving to be a big one for mergers and acquisitions.
  9. Fundamental Analysis

    Explaining Capital Employed

    Generally, capital employed refers to all of the assets used in a business that contribute to the company’s ability to earn revenue.
  10. Investing

    Salesforce Buyout

    It’s been over a month now since buyout rumors first began to circulate after sources revealed that Salesforce, the biggest cloud computing software company, was approached by a potential buyer. ...

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!