Bear Hug: The Legal Implications of Hostile Takeover Offers
Definition & Meaning
A bear hug is a term used in corporate finance to describe a takeover offer that significantly exceeds the current market value of a target company. This type of offer is often made to gain shareholder support, even if the board of directors of the target company opposes the acquisition. The intention behind a bear hug is to pressure the board into accepting the offer due to the high value presented to shareholders.
Legal Use & context
Bear hugs are primarily encountered in the context of mergers and acquisitions (M&A). They are relevant in corporate law and can involve various legal procedures, including negotiations and shareholder meetings. Individuals or companies considering a bear hug should be aware of the legal implications and may benefit from using legal templates available through services like US Legal Forms to navigate the complexities of such transactions.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A large technology company offers $100 per share for a smaller tech firm whose shares are currently trading at $70. The offer is attractive enough to persuade shareholders to support the acquisition, despite the target company's board opposing it.
Example 2: A pharmaceutical company proposes a bear hug to acquire a competitor, offering a 40 percent premium over the current stock price, leading to a shareholder vote that ultimately favors the acquisition. (hypothetical example)