DEFINITION of Godfather Offer
A Godfather offer is an irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium is extremely generous compared to the prevailing market price. Therefore, if the target company's management refuses the offer, shareholders may initiate lawsuits or other forms of revolt against the target company for not performing their fiduciary duty of looking out for the best interests of the shareholders.
BREAKING DOWN Godfather Offer
A Godfather offer is even harder for the target company's management to refuse when its stock price has been flat or declining for an extended period of time, as long-time investors would jump at the opportunity to cash out at an elevated price.
In essence, the idea of a Godfather offer isn't so much an offer as a sly, yet heavy-handed demand: do as I say, or else.
The expression comes from the famous line — "make him an offer he can't refuse" — featured in the Godfather trilogy. It is now one of the most celebrated quotations from an American film.
In one of the film's best-known scenes, Don Vito Corleone (Marlon Brando) is visited by his godson, the famous singer Johnny Fontane (Al Martino) - a characterization that is widely believed to be based on Frank Sinatra, although many people associated with Sinatra and the film have denied this. Fontane asks for Vito's help to secure a film role that will boost his fading career. The head of the film studio, has previously refused to give Fontane the part, but Don Corleone tells Johnny:
"I'm gonna make him an offer he can't refuse."
The studio head later wakes to find the severed head of his expensive racehorse in his bed. Unsurprisingly, Fontane is subsequently given the part.