A hostile bid is a takeover attempt where an acquiring company offers to buy shares directly from the target company's shareholders, bypassing management and the board of directors who oppose the deal.
How It Works
The bidder typically makes a public tender offer at a premium to the current market price, aiming to secure enough shares for control, often at least 51%. This can trigger defensive measures like poison pills or lead to a proxy fight to replace the target's leadership.
Key Differences
Unlike a friendly bid, where the target's board negotiates and approves terms, a hostile bid ignores management and appeals straight to shareholders for better value. Examples include activist investors like Carl Icahn targeting firms such as Clorox.
