A hostile bid, also known as a hostile takeover bid or unsolicited bid, occurs when one company seeks to acquire another company against the wishes of the target company’s management and board of directors. In a hostile bid, the acquiring company approaches the target company’s shareholders directly, bypassing the management and board.

Key features and considerations of a hostile bid include:

1. **Unsolicited Nature:**
– A hostile bid is characterized by being unsolicited, meaning that the acquiring company makes an offer to acquire the target company without the target’s management or board inviting or welcoming the bid.

2. **Direct Communication with Shareholders:**
– Instead of negotiating with the target company’s management and board, the acquiring company communicates directly with the shareholders. The goal is to persuade a sufficient number of shareholders to accept the offer and facilitate the acquisition.

3. **Motivations for Hostile Bids:**
– Hostile bids may be motivated by various factors, including a belief that the target company is undervalued, a desire to gain control of valuable assets, or a strategic interest in consolidating market share.

4. **Tender Offer:**
– In a hostile bid, the acquiring company often makes a tender offer directly to the shareholders. A tender offer is a public solicitation to buy shares at a specified price, often higher than the current market price.

5. **Shareholder Consideration:**
– Shareholders of the target company have the option to accept or reject the tender offer. If a sufficient percentage of shareholders accept the offer, the acquiring company gains control of the target.

6. **Defensive Measures by Target:**
– Target companies may employ various defensive measures to resist a hostile bid. These measures can include adopting poison pills (shareholder rights plans), seeking alternative bidders, or implementing other strategies to make the acquisition more challenging.

7. **Regulatory Approval:**
– Hostile bids are subject to regulatory scrutiny and approval. Regulatory bodies may assess the potential impact on competition, market dynamics, and the interests of shareholders before approving the acquisition.

8. **Proxy Contests:**
– In some cases, the acquiring company may initiate a proxy contest to replace the target company’s board with individuals sympathetic to the acquisition. This allows the acquiring company to gain control and facilitate the bid.

9. **Legal and Ethical Considerations:**
– Hostile bids often raise legal and ethical considerations. Laws and regulations in the target company’s jurisdiction may impose restrictions on certain tactics, and shareholders may have legal recourse to challenge the bid.

10. **Financial and Strategic Due Diligence:**
– Both the acquiring and target companies typically conduct thorough due diligence to assess the financial health, assets, liabilities, and strategic fit of the potential acquisition.

11. **Hostile Bid Outcome:**
– The outcome of a hostile bid can vary. If the acquiring company successfully convinces a sufficient number of shareholders to tender their shares, the bid may succeed. However, if the target company’s defenses are effective, the bid may be thwarted.

Hostile bids are complex and often involve intense negotiations, legal battles, and public relations efforts. While some hostile bids lead to successful acquisitions, others may result in the breakdown of negotiations or alternative resolutions, such as a friendly merger or the target company adopting defensive measures to maintain independence.