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Takeover Bid

A takeover bid is an offer made by a company or investor to acquire another company by purchasing a significant portion or all of its shares, typically at a premium to the current market price. The bid can be friendly, with the target company's approval, or hostile, where the acquiring company attempts to take control without the target's consent. Takeover bids are common in mergers and acquisitions and often involve negotiations with shareholders and management.

Example

Company A makes a takeover bid for Company B, offering $150 per share, a 20% premium over Company B’s current stock price, to gain control of the company.

Key points

• An offer to buy a company’s shares, usually at a premium.

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

• A common strategy in mergers and acquisitions.

Quick Answers to Curious Questions

In a friendly takeover, the target company agrees to the acquisition, while in a hostile takeover, the acquiring company seeks control without the target's approval.

A premium incentivizes shareholders to sell their shares, making the offer more attractive than the current market price.

The stock price of the target company often rises in response to a takeover bid, reflecting the premium offered by the acquiring company.