In a takeover bid, a company that wants to acquire control of another publicly announces its intention to purchase shares in the targeted firm, setting a purchase price and a period duringwhich it will accept offers to sell shares. Compared with simply purchasing shares on the open market, which boosts the share price, thereby increasing the acquisition cost, a takeover bid allows the purchase to be conducted at a set price over a specific period of time. When sell offers surpass the number of shares the bidder plans to acquire, the bidder buys shares from each seller in proportion to their offer. Takeover bids are a popular acquisition method in the U.S. and Europe. The procedure was introduced in Japan in 1971, but tight regulations hindered the process until 1990, when the Securities and Exchange Law was revised to extend the purchase period and ease other provisions. As a result, the number of companies involved in takeover bids is beginning to rise. Recently, a business acquisition specialist launched a takeover bid for Shoei Co., which is listed on the second section of the Tokyo Stock Exchange. *Refer to Corporate Buyout Funds.
The initial offer by a predator company for another. The bid can be in cash, shares or a combination. Often a counterbid comes from a third party. Bids may then be increased by either predator in which case the situation becomes a takeover battle. Bids usually have a closing date for acceptance but these are often extended. Usually, one predator withdraws and may sell the accumulated share to the victor.
An attempt by an outside corporation or group, usually called the aggressor or "insurgent," to wrest control away from incumbent management of the TARGET COMPANY. A takeover attempt may involve purchase of SHARES, a TENDER OFFER, a sale of assets, or a proposal that the target merge voluntarily into the aggressor. See LEVERAGED BUYOUT, GOLDEN PARACHUTE, GREENMAIL, POISON PILL, TENDER OFFER, TARGET COMPANY, WHITE KNIGHT.