Hostile Takeover Bid

A hostile takeover bid is an attempt to gain control of a publicly traded company without the cooperation or consent of its board of directors. When a board rejects an acquisition proposal, the would-be acquirer typically pursues one of three paths: buying shares on the open market, making a tender offer directly to shareholders, or launching a proxy fight to replace the board.

Why acquirers pursue hostile bids

Acquirers may seek control to:
* Expand into new markets or distribution channels.
* Increase market share or eliminate a rival.
* Acquire technology, intellectual property, or other strategic assets.
* Unlock perceived shareholder value (often pursued by activist investors).

Common tactics

Open-market purchases
* The acquirer buys shares directly on the market to build a controlling stake.
* This approach can push the share price higher as purchases accumulate, making it costly and sometimes impractical.

Tender offer
* A formal offer to shareholders to buy shares at a specified price—typically above market value—to entice sales.
Tender offers often include a set time window and require filings with regulators (e.g., the SEC).
The acquirer usually outlines its plans for the target company as part of the offer.

Proxy fight
* The acquirer campaigns to persuade shareholders to vote, by proxy, for new board members who favor the takeover.
If successful, the new board can approve the acquisition.
Proxy fights are commonly used when takeover defenses or other obstacles block a straightforward tender offer.

Board response and defenses

Boards may reject offers they deem not in shareholders’ long-term interest. Target companies also deploy defensive measures to resist hostile bids; when defenses are in place, acquirers often turn to proxy contests or other strategic approaches.

Historical context and recent trends

Hostile takeovers were prominent in the 1980s during a wave of high-profile corporate raids. Such bids tend to surge after market downturns when some companies appear attractively priced. Observers predicted renewed activity after the 2020 market shock; global mergers and acquisitions activity surged in 2021, with reports citing roughly 62,000 deals totaling about $5.1 trillion and more than 100 “megadeals” over $5 billion.

Key takeaways

• A hostile takeover bypasses a target’s board and appeals directly to shareholders or seeks to change the board.
• The main tactics are open-market accumulation, tender offers, and proxy fights.
• Tender offers require regulatory filings and usually offer a premium.
• Proxy fights aim to replace board members to secure approval.
• Hostile activity often increases after market downturns and other periods of disruption.