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Financial Terms and Glossary

Squeeze out

Squeeze-Out

A squeeze-out occurs when a majority shareholder forces minority shareholders to sell their shares, often in the context of a merger or acquisition. In many jurisdictions, once a shareholder obtains a certain percentage of ownership—typically around 90%—they can legally compel the remaining shareholders to sell their shares at a specified price. Squeeze-outs allow companies or investors to gain full control over a company and remove minority shareholders.

Example

A corporation that holds 95% of a target company's shares initiates a squeeze-out to acquire the remaining 5% from minority shareholders, completing its acquisition.

Key points

• Occurs when a majority shareholder forces minority shareholders to sell their shares.

• Typically happens after a shareholder obtains a large ownership stake (e.g., 90%+).

• Common in mergers and acquisitions.

Quick Answers to Curious Questions

Why are squeeze-outs commonly used in mergers and acquisitions?

They allow the acquiring company to gain full control over the target by eliminating minority shareholders.

What protections are available for minority shareholders in a squeeze-out?

In many jurisdictions, laws require fair compensation for minority shareholders based on the market value of their shares.

How does a squeeze-out differ from a traditional buyout?

In a squeeze-out, majority shareholders forcibly acquire the remaining minority shares, while traditional buyouts involve voluntary sales of shares.

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