Squeeze out
M&A / Merger ModelThe statutory mechanism letting a bidder that has acquired most of a company force the last minority holders to sell.
Also written: compulsory acquisition
Once a bidder has acquired 90% in value of the shares to which an offer relates, UK company law lets it compulsorily acquire the remainder on the same terms. Most European jurisdictions have an equivalent at a similar threshold.
Without it, a handful of holders refusing to accept could block full ownership indefinitely, preventing delisting, group tax consolidation and the ability to move cash freely around the structure. That is why 90% acceptance is such a live threshold in any offer.
It is why a contractual takeover offer and a scheme of arrangement lead to different tactics. A scheme is a court approved procedure binding all shareholders once approved by the requisite majority, so it delivers 100% cleanly but needs the target board's cooperation to convene.
Minority holders are not without protection: the terms must be the same as the offer, and there are routes to apply to court, though successfully challenging a widely accepted offer price is rare.
Worked example
A takeover offer receives acceptances covering 91% of the target's shares.
Above 90%, the bidder can compulsorily acquire the remaining 9% on the same terms, so it reaches 100% and can delist and consolidate for tax.
Had acceptances stopped at 88%, a small group of holdouts could have blocked full ownership indefinitely, which is why a scheme of arrangement is often preferred where the board is cooperative.