What is a Takeover Bid
A takeover bid is a type of corporate action in which an acquiring company makes an offer to the target company's shareholders to buy the target company's shares to gain control of the business. Takeover bids can either be friendly or hostile.
BREAKING DOWN Takeover Bid
Some examples of takeover bids include:
Two-Tier Bid: The acquiring company is willing to pay a premium above and beyond the share's price to convince shareholders to sell their shares.
Any-and-All Bid: The acquiring company offers to buy any of the target firm's outstanding shares at a specific price.
Managers of potential acquirers often cite some level of synergy, tax benefits or diversification for the rationale behind a takeover bid offer. Empirical studies are mixed, but history shows, in post-merger analysis, a target company's shareholders often benefit most. Likely from premiums paid by acquirers.
Contrary to many popular Hollywood movies, most mergers begin friendly. Although the idea of the hostile takeovers by sharks makes for good entertainment, corporate insiders know hostile bids are an expensive undertaking and many fail, which can be costly professionally.