What is Tender

To tender is to invite bids for a project or accept a formal offer such as a takeover bid. Tender usually refers to the process whereby governments and financial institutions invite bids for large projects that must be submitted within a finite deadline. The term also refers to the process whereby shareholders submit their shares or securities in response to a takeover offer.




For projects or procurement, most institutions have a well-defined tender process, as well as processes to govern the opening, evaluation, and final selection of the vendors. This ensures that the selection process is fair and transparent. Regarding tender offers related to takeover attempts, the conditions of the offer are clearly listed and include the purchase price, number of shares requested, and a deadline for a response.

Request for Tender

A request for tender (RFT) is a formal and structured invitation to suppliers to submit competitive bids to supply raw materials, products, or services.  Because this is a public and open process, laws were created to govern the process to ensure a fair competition among bidders.  For example, without laws, bribery and nepotism may flourish.  Tender services are available for potential bidders and include a wide range of tenders from private and public sources.  These services include crafting suitable bids, coordinating the process to ensure deadlines are met, and ensuring compliance with applicable laws.  In the private sector, requests for tenders are referred to as requests for proposals (RFP).  An RFT allows potential bidders to respond to the defined needs of the issuer.

Tender Offer

A tender offer is a public solicitation to all shareholders requesting that they tender their stock for sale at a specific price during a certain time. To entice shareholders to release a specific number of shares, the offer typically exceeds the current market value of the shares.  

Since the deal targets shareholders directly, it effectively removes upper management from the process unless those members of management are also substantial shareholders. If the company looking to take over already has a notable share of the target company, referred to as a foothold block, a minority of the remaining shareholders may be enough to allow the company making the offer to become the majority shareholder. However, if the requested shares are not released by the deadline, the deal is often considered void, effectively allowing shareholders to block the deal.