DEFINITION of 'Hostile Bid'

A specific type of takeover bid that is presented directly to the target firm's shareholders because the target's management is not in favor of the deal. A hostile bid is usually presented through a tender offer, under which the acquiring company offers to purchase the common shares of the target at a substantial premium. Simply put, a hostile bid is the bid offered in a hostile takeover.

BREAKING DOWN 'Hostile Bid'

Hostile bids can mean major changes for the organizational structure. Despite target management objections, shareholders face a situation similar to a prisoners' dilemma, where only those that accept the tender are guaranteed to enjoy the premium price. If the board pursues defensive action to stop the merger, a proxy fight can occur where the acquirer will often attempt to convince the target shareholders to replace management.

RELATED TERMS
  1. Hostile Takeover Bid

    A hostile takeover bid occurs when an entity attempts to take ...
  2. Tender Offer

    A tender offer is an offer to purchase some or all of shareholders' ...
  3. "Just Say No" Defense

    A "just say no" defense is a strategy used by boards of directors ...
  4. Williams Act

    The Williams Act was passed in 1968 to protect shareholders and ...
  5. Bid Tick

    An indication of whether the latest bid price is higher, lower ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for ...
Related Articles
  1. Investing

    Mergers and acquisitions: Understanding takeovers

    In the language of mergers and acqusitions, battleground terms meld with bizarre metaphors to create a unique vocabulary.
  2. Personal Finance

    How The Auction Market Works

    Here's a look into the online auction market and how to get yourself the best value possible on sites like eBay and Quibids.
  3. 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.
  4. Investing

    Qualcomm May Have to Pay $120 to Clinch NXP Deal

    Qualcomm may have to boost its $110-a-share bid price for NXP given the current lackluster enthusiasm.
  5. Investing

    What Investors Can Learn From M&A Payment Methods

    How a company pays in a merger or acquisition can reveal a lot about the buyer and seller.
  6. Investing

    Qualcomm Is Losing Its Grip On The NXP Deal

    Qualcomm is under growing pressure to raise its $110/share offer for NXP it if wants to close the deal.
  7. Investing

    Qualcomm Will Need To Step Up Its Bid For NXP

    Qualcomm may be under pressure to raise its bid price for NXP following anemic tender offer results.
  8. Investing

    Explaining Dutch Auction

    A Dutch auction is a public offering auction.
  9. Investing

    Comcast Formalizes $30.7 Billion Bid for Sky

    Comcast has ignited a bidding war for Sky by putting pressure on Fox and Disney to ante up.
RELATED FAQS
  1. 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 >>
  2. What happens to the shares of stock purchased in a tender offer?

    Learn what a tender offer is, whether it is a good idea to accept a tender offer and what happens to the shares of stock ... Read Answer >>
Hot Definitions
  1. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  2. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  3. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  4. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  5. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  6. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
Trading Center