To convince shareholders to sell their shares, the tender offer price is usually set at a significant premium over the current market price (frequently 50 percent or more).
Prior to announcing a tender offer, a raider will often purchase shares in the open stock market at prevailing market prices.
In a practice known as “greenmail,” the target might buy back its shares from the raider at a premium.
Thus, a failed hostile takeover could easily leave the target firm weaker, both competitively and financially, than prior to the bid.
According to his theoretical premise of a market for corporate control, stock prices are not only efficient but they also provide a critical indicator of managerial effectiveness.
When a company’s share price falls relative to the overall market, it signals that the firm’s managers are underperforming.Regardless of whether managers are underperforming due to incompetence or self-interested behavior, the market for corporate control promises that the fault will become readily apparent via the firm’s share price.Conversely, critics of hostile takeovers argue that the practice forces managers to focus too narrowly on short-term stock performance to the detriment of long-run shareholder value.Companies can take several precautionary steps to curb the threat of a hostile takeover.The most famous anti-takeover measure is the “poison pill,” which was first conceived by the attorney Martin Lipton in the 1980s.While there are many variations, the basic poison pill grants shareholders the option to purchase additional shares at a significant discount in the event of a hostile takeover bid, thus diluting the raider’s ownership and making the acquisition more costly.Firms can also implement a “staggered board” in which directors serve multiyear terms with only a portion of members coming up for election each year.Raiders may also initiate a proxy contest, an attempt to convince target firm shareholders to replace existing board members with a new group that will approve the acquisition.While tender offers and proxy contests can be used in tandem, they are often regarded as alternative mechanisms for accomplishing hostile takeovers.Empirical evidence suggests that proxy contests are more prevalent when there is greater evidence of managerial ineffectiveness, as measured by stock market performance and return on assets.Tender offers are used more frequently when the target is highly leveraged.
Comments Essays On Tender Offer
Wendy Wasserstein Wasserstein, Wendy Vol. 183 - Essay.
Throughout the 1980s, Wasserstein nurtured her growing theatrical reputation with such plays as Isn't It Romantic 1981, Tender Offer 1983, and Miami 1986.…
Essay on the Buy-Back of Shares Stock Market Financial.
Essay on the Introduction to Buy-Back of Shares; Essay on the Objectives of. viii A company opting for buy-back through the public offer or tender offer shall.…
A Comparison of Lisa and Paul Characters in Tender Offer by.
Wendy Wasserstein's play Tender Offer is a dialogue between a father, Paul and his daughter, Lisa. Paul is too wrapped up. About this essay. More essays like.…
Mini-Tender Offers Investor.gov
Mini-tender" offers are tender offers that, when consummated, will result in the person who makes the tender offer owning less than five percent of a company's.…
Tender Offer Essay - 441 Words - StudyMode
Nov 30, 2005. In Tender Offer by Wendy Wasserstein, little action occurs in that no one dies or screams or cries. However, enormous changes take place.…
Hostile Takeovers Essay ⋆ Business Essay Examples.
Within the United States, hostile takeovers are most frequently attempted through a financial and legal mechanism known as a tender offer i.e. a public.…
Communicating a "Tender Offer" Essay - 1794 Words
Nov 12, 2010. Young Byoung Park English 161 29 October 2010 Communicating a “Tender Offer” The main problem between the main characters in Wendy.…
Drama Essay Example Symbolism in Tender Offer
Wendy Wasserstein's comedy Tender Offer provides a good example of how symbolism can work in a play.…
Communicating a 'Tender Offer' - 1794 Words Cram
Nov 12, 2010. Free Essay Jake Young Byoung Park English 161 29 October 2010 Communicating a “Tender Offer” The main problem between the main.…
NVIDIA Responds to TRC Capital's 'Mini-Tender' Offer.
Feb 3, 2019. NVIDIA has received notice of an unsolicited “mini-tender” offer by TRC Capital Corporation TRC dated Jan. 21, 2019, to purchase up to.…