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.

BREAKING DOWN '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. Hostile Bid

    A specific type of takeover bid that is presented directly to ...
  2. Takeover Bid

    A type of corporate action in which an acquiring company makes ...
  3. Corporate Raider

    An investor who buys a large number of shares in a corporation ...
  4. Dawn Raid

    When a firm or investor buys a substantial number of shares in ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for ...
  6. Busted Takeover

    A highly leveraged corporate buyout that is contingent upon the ...
Related Articles
  1. Small Business

    What is a Takeover?

    A takeover happens when one company makes a bid to acquire a target company.
  2. Investing

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  3. Investing

    Hostile Takeover

    A hostile takeovers is an unfriendly acquisition attempt by a company or raider that is strongly resisted by the management and the board of directors of the target firm. Learn more about the ...
  4. Investing

    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.
  5. Investing

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  6. Investing

    Target Embraces Being A Dividend Stock (TGT)

    Target has ended its growth stage. Despite plenty of areas in which the company can expand, Target has instead decided to focus on paying dividends.
  7. Investing

    Trademarks Of A Takeover Target

    These tips can lead you to little companies with big prospects.
  8. Small Business

    How To Profit From Mergers And Acquisitions Through Arbitrage

    Making a windfall from a stock that attracts a takeover bid is an alluring proposition. But be warned – benefiting from m&a is easier said than done.
RELATED FAQS
  1. Under what circumstances might a company decide to do a hostile takeover?

    Learn about why companies use a hostile takeover to gain control of another company, and understand the different methods ... Read Answer >>
  2. What's the difference between a merger and a hostile takeover?

    Understand the difference between a merger and a hostile takeover, including the different ways one company can acquire another, ... Read Answer >>
  3. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Learn why it may often be in the best interest of a shareholder to accept a tender offer made at a premium to the market ... Read Answer >>
  4. What happens to the stock prices of two companies involved in an acquisition?

    When a firm acquires another entity, there usually is a predictable short-term effect on the stock price of both companies. ... Read Answer >>
  5. How can a company buy back shares to fend off a hostile takeover?

    Learn about why a business might use a stock buyback to thwart a hostile takeover attempt by reducing its total assets and ... Read Answer >>
  6. What happens to the shares of a company that has been the object of a hostile takeover?

    Learn about the effect on the share price of companies that are targets of hostile takeovers, which are tactics used by famed ... Read Answer >>
Hot Definitions
  1. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  2. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  5. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
  6. Long Run

    A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all ...
Trading Center