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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

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.

The premium offered over the current market price provides an incentive for investors to sell their shares.

If the desired number of shares is not tendered, the acquiring company may increase the offer price or reconsider its acquisition strategy.