Hostile bid
M&A / Merger ModelAn offer taken directly to shareholders after the target's board has refused to recommend it.
Also written: hostile takeover, unsolicited offer
A hostile bid bypasses the board. The bidder announces an offer and argues its case directly to shareholders, who decide whether to accept regardless of what their directors advise.
It is harder and more expensive than an agreed deal. There is no diligence access beyond public information, so the bidder prices with less certainty, and integration begins with a management team that fought the deal.
In the UK the balance favours the bidder more than in the US, because Rule 21 of the Takeover Code prevents the target board from taking frustrating action without shareholder approval. The American defensive toolkit, a poison pill adopted mid bid or a staggered board used to run out the clock, is largely unavailable.
What a UK board can still do is argue: recommend rejection, publish a defence document contesting the value, and look for a competing bidder, since persuasion is not frustrating action.
Worked example
A bidder announces a 250p offer after the board rejects it at 230p, and takes the case directly to shareholders.
It has no diligence beyond public filings, so it prices with less certainty and typically has to offer a larger premium to compensate.
In the UK the board cannot adopt a poison pill in response. It can publish a defence document, recommend rejection, and seek a white knight, because persuasion is not frustrating action.