Tender Offer

A tender offer is a public, open offer made by a company or investor to purchase a certain percentage of shares from shareholders of a target company, typically at a premium over the market price. Tender offers are used in mergers, acquisitions, and buybacks and can be friendly or hostile. Shareholders are invited to sell their shares within a specified period, often to enable the buyer to acquire control or reduce outstanding shares.

Example

An investment firm issues a tender offer to buy 30% of a target company’s shares at a price 20% above the current market price, aiming to take control of the company.

Key points

• A public offer to buy shares at a premium price, used in acquisitions or buybacks.

• Can be friendly or hostile, depending on the target company’s response.

• Often designed to acquire control or reduce the number of shares outstanding.

Quick Answers to Curious Questions

How does a tender offer differ from a traditional merger?

A tender offer is a direct approach to acquiring shares from shareholders, while a traditional merger typically involves negotiations with the company’s board of directors.