Resources / Glossary / Tender offer

Tender offer.

Aka. Exchange offer · two-step merger
All terms

What is a tender offer?

A tender offer is a public proposal made by an acquirer directly to a company's shareholders to purchase their shares at a specified price, usually a premium to the prevailing market price, within a fixed window. Because the offer goes to shareholders rather than through the board and a proxy vote, it is the fastest path to control of a public company.

Shareholders tender their shares by formally accepting the offer; if enough shares are tendered to clear the acquirer's minimum-condition threshold, the deal proceeds. In a friendly deal the target's board endorses the offer; in a hostile one the acquirer takes the bid straight to shareholders over the board's objection.

Tender offers are governed by securities rules that dictate how long the offer must stay open, what disclosures the acquirer must make, and the right of shareholders to withdraw tendered shares before the deadline.

How a tender offer actually works

Most public-company acquisitions structured this way follow a two-step pattern designed to convert a successful offer into full ownership.

  1. Launch and disclosure. The acquirer publishes the offer terms — price, the type and amount of securities sought, conditions, and the expiration date — and the offer must remain open for a minimum period.
  2. Tender window. Shareholders elect whether to tender. The acquirer typically sets a minimum tender condition, often a majority of shares, below which it is not obligated to close.
  3. Acceptance and payment. If conditions are met, the acquirer accepts the tendered shares and pays out, taking control of the company.
  4. Squeeze-out merger. Once the acquirer holds enough shares, a back-end merger cashes out the remaining non-tendering holders at the same price, delivering 100% ownership without a separate vote.

The structure trades a longer proxy timeline for speed, but it works cleanly only when the acquirer can plausibly cross the ownership threshold needed for the squeeze-out.

Tender offer vs. one-step merger

The alternative is a one-step merger, where the target's board signs a merger agreement and the deal is approved by a shareholder vote at a special meeting. That path requires a proxy statement, a meeting date, and a counting of votes — typically slower.

A tender offer skips the vote: shareholders effectively decide with their shares. The trade-off is execution risk. If too few shares are tendered, the offer can fail outright, whereas a negotiated merger with board backing carries a clearer route to a binding outcome.

Frequently asked.

5 questions
01 What's the difference between a tender offer and a merger?

A one-step merger is approved by a shareholder vote after the board signs a merger agreement; a tender offer is made directly to shareholders, who accept by tendering their shares, and no separate vote is required to gain control.

In practice many public deals combine both: a tender offer for speed, followed by a back-end squeeze-out merger to mop up the remaining shares at the same price.

02 Can a tender offer be hostile?

Yes. Because the offer goes straight to shareholders, an acquirer can launch a tender offer even when the target's board opposes the deal. The board can recommend that shareholders reject it and may deploy defenses, but it cannot stop shareholders from tendering.

Friendly tender offers, where the board endorses the bid, are far more common and tend to close faster because there is no defensive fight.

03 What is the minimum tender condition?

It is the threshold of shares that must be tendered before the acquirer is obligated to close — usually a majority of outstanding shares, and often the level needed to complete the back-end squeeze-out merger.

If the condition is not met by expiration, the acquirer can extend the offer, waive the condition, or walk away.

04 Can shareholders withdraw shares once tendered?

Yes. Securities rules generally let shareholders withdraw tendered shares at any point while the offer remains open, which protects them if a competing bid emerges or the terms change.

Once the offer expires and shares are accepted for payment, the withdrawal right ends.

05 What happens to shareholders who don't tender?

If the acquirer crosses the ownership threshold and completes a back-end merger, non-tendering shareholders are cashed out at the same price as those who tendered, leaving them no holdout advantage.

Where state law provides them, dissenting holders may instead pursue appraisal rights to seek a judicially determined fair value.

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