There are several ways to acquire control of a corporation. Where mergers or direct acquisitions fail, a tender offer (also called a takeover) can be attempted. Alternatively, the person seeking to acquire control can mount a proxy fight, as previously discussed in this chapter, by nominating an alternative slate of directors and then soliciting shareholders for their annual proxies in preference to giving their proxies to current management. In a tender offer, the offeror announces to the public that it wishes to acquire a specific number of shares (typically the number needed to gain control). It identifies where stockholders who want to participate must tender (that is, deliver) their shares. It also specifies the opening bid price. If fewer than the desired number of shares are tendered, the tender offeror can either walk away or increase the offering price. Every tendering shareholder receives the highest price if the offer is successful. The shares are returned if the offer fails. 

Questions 

1. Describe what a tender offer is and explain how it works. 

2. Explain why a tender offer can become a hostile takeover.