A hostile takeover bid is an attempt by one company to gain control of another company without the approval or cooperation of the target company’s board of directors. It is called “hostile” because the target’s management opposes the deal, but the bidder keeps pursuing it anyway, usually by going directly to shareholders.

How it works

In a hostile bid, the acquiring company typically bypasses management and makes a public offer to shareholders to buy their shares, often at a premium above the current market price to persuade them to sell. The goal is to acquire a controlling stake (often more than 50% of the voting shares) so the bidder can replace the board or management and push the takeover through.

Common tactics include:

• A tender offer: the bidder offers to buy shares directly from shareholders at a premium price for a set period.

• A proxy fight: the bidder asks shareholders to vote in new directors who will approve the takeover, effectively removing resisting management.

Why companies use hostile bids

Companies launch hostile bids when they believe a target is valuable but its management is unwilling to sell or negotiate. The bidder may see opportunities for higher profits, cost savings, or greater market power by combining the businesses, even if the target’s executives disagree.

How targets respond

Target companies often deploy “defensive” measures to block or discourage a hostile bid, such as poison pills (plans that dilute the bidder’s stake) or lucrative exit packages for executives (golden parachutes). These tactics aim to make the takeover more difficult, more expensive, or less attractive to the hostile bidder.