Tender Offer

The acquirer publicly announces an offer to buy shares at a fixed price — usually a meaningful premium to the unaffected market price to entice shareholders to sell. The offer stays open for a defined period (at least 20 business days under the U.S. Williams Act) and is typically conditional: the acquirer only completes the purchase if a minimum number of shares are tendered, commonly enough to secure majority or controlling ownership. Shareholders individually decide whether to 'tender' their shares. If conditions are met, the acquirer buys the tendered shares; if not, the offer can be withdrawn.

There are two ways to acquire a public company. A statutory (one-step) merger requires negotiating a single agreement with the target's board, then a shareholder vote — slower, but it captures 100% of shares at once. A tender offer (often the first step of a 'two-step' acquisition) goes directly to shareholders and can close faster, without needing board cooperation upfront. The tradeoff: a tender rarely captures 100% voluntarily, so the acquirer must follow up with a back-end squeeze-out merger to force out remaining minority holders once it crosses an ownership threshold (around 90% in many jurisdictions).

Because a tender offer bypasses the board, it's the classic hostile-takeover weapon — an acquirer can appeal directly to shareholders even if management refuses to negotiate. Targets defend with poison pills, which massively dilute a hostile bidder once it crosses an ownership trigger, effectively forcing negotiation. But tender offers are also used in friendly deals: a negotiated two-step tender can close faster than a one-step merger, getting the premium to shareholders sooner. The premium offered typically reflects a control premium over the standalone trading price.