DEFINITION of 'Takeunder'

A takeunder is an offer to purchase or acquire a public company at a price per share that is less than its current market price. A takeunder is almost always unsolicited and generally occurs when the target company is in severe financial distress or has some other major problem that threatens its long-term viability, as a going concern. A takeunder is similar to a takeover in most respects, except for the potential purchase price, since a conventional takeover target would usually receive a premium to its market price from a potential bidder.

BREAKING DOWN 'Takeunder'

For example, a company that receives an offer to be acquired at $20 per share when its shares are trading at $22 would be considered to be the subject of a takeunder offer. Note that in a takeunder situation, the offer is unlikely to be at a very large discount to the current market price, since the target company's shareholders would be quite unlikely to tender their shares if the offer is substantially below the current market price. As well, existing shareholders can sell their shares at the (higher) market price, rather than the takeunder price.

The target company may reject a takeunder attempt outright as a low-ball offer, but it may give the offer due consideration if it is faced with insurmountable challenges. This may include dire financial straits, steep erosion in market share, legal challenges and so on. In such cases, if the company believes that its chances of survival are much better if it is acquired rather than continuing as a stand-alone entity, it may recommend to its shareholders to accept the takeunder offer.

In most cases, the potential for a takeunder scenario arises when an entity is generally no longer considered a going concern. Meaning, for any number of reasons, a business is no longer viable. Although a management team can put on a good face, and even secure some speculative funding, for all intents and purposes, an acquisition is the last best option.

RELATED TERMS
  1. All Cash, All Stock Offer

    An all cash, all stock offer is a proposal by one company to ...
  2. Risk Arbitrage

    Risk arbitrage is a strategy to profit from the narrowing of ...
  3. Mergers and Acquisitions - M&A

    Mergers and acquisitions (M&A) is a general term that refers ...
  4. Takeover

    A takeover occurs when an acquiring company makes a bid in an ...
  5. Takeover Bid

    A takeover bid is a corporate action in which an acquiring company ...
  6. Acquisition Premium

    An acquisition premium is the difference between the estimated ...
Related Articles
  1. Investing

    Trademarks of a Takeover Target

    These tips on finding viable takeover targets can lead you to little companies with big prospects.
  2. 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.
  3. Investing

    How mergers and acquisitions can affect a company

    M&A can have a profound effect on a company’s growth prospects and outlook, but with a significant degree of risk.
  4. Investing

    Know your shareholder rights

    Common-stock owners have numerous privileges and should be vigilant in monitoring a company. Read on to learn what rights you have as a shareholder.
  5. Investing

    Why Public Companies Go Private

    Privatization can give management more time to make money for investors, but at what cost?
  6. Insights

    Avoid Betting on These Acquisition Target Stocks (PFE, AGN)

    Many target stocks high on acquirers list are trading at deep discounts. Here’s why investors should avoid them.
  7. Investing

    5 Tips On When To Sell Your Stock

    Learn when it might be time to sell your stock.
  8. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
RELATED FAQS
  1. 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 >>
  2. A Hostile Takeover vs. Friendly Takeover

    Learn about the difference between a hostile takeover and a friendly takeover, and understand how proxy fights and tender ... Read Answer >>
  3. What Happens to Call Options If a Co. is Bought?

    Typically, the announcement of a buyout offer by another company is a good thing for shareholders. Read Answer >>
Trading Center