Tender offer

A tender offer is a public offer to buy shares directly from a company's shareholders, usually at a price above the current market value, made in order to accumulate a controlling stake in the company. Rather than negotiating with the target's board first, the acquirer goes straight to shareholders and asks them to tender, or offer up, their shares at the stated price.

Tender offers are used in both friendly and hostile deals. In a hostile takeover, an acquirer may launch a tender offer specifically because the target's board has rejected a negotiated deal, betting that individual shareholders will find the premium attractive enough to sell regardless of the board's position. Tender offers typically come with conditions, most commonly a requirement that a minimum percentage of outstanding shares be tendered for the deal to proceed, and SEC rules require the offer to stay open for a minimum period and to be made on the same price and terms to every shareholder.

Companies also use tender offers on their own stock, known as a self-tender offer, as an alternative to buying back shares gradually on the open market. A self-tender lets a company repurchase a large block of stock quickly at a set price, giving shareholders who want to sell an active opportunity to do so rather than waiting for the company to buy shares in ordinary trading over time.