Unsolicited Bid
What Is an Unsolicited Bid?
An unsolicited bid is an offer made by an individual, [investors](/financial backer), or a company to purchase a company that isn't actively seeking a buyer. Unsolicited bids may now and again be alluded to as hostile bids if the target company would rather not be acquired. They usually come up when a potential acquirer sees value in the target company.
How Unsolicited Bids Work
An unsolicited bid comes about when a potential acquirer looks into a target company and makes a bid to purchase it. In this case, the bid is the aftereffect of the acquirer's initiative as opposed to at the request of the bid-upon company.
An unsolicited bid to purchase a company not meaning to be sold might be trailed by other unsolicited bids as the news ventures. These different bids might up the purchase price and begin a bidding war or takeover fight.
While unsolicited bids might include private companies, many bids are made by public corporations. These sorts of bids were well known during the 1980s when numerous bidders recognized the potential for profit in undervalued companies or those that were blundered.
$202 billion
The amount Vodafone paid for Germany's Mannesmann in 2000 after its original unsolicited offer was dismissed. This is supposed to be one of the world's biggest acquisitions.
Unsolicited versus Requested Bid
An unsolicited bid might shock the target, while a requested bid is the inverse. With a requested bid, the target is actively seeking a purchaser and needs to be purchased. These sorts of bids are frequently called friendly takeovers, or recommendations that are approved by the management of the two companies.
For what reason Do Companies Make Unsolicited Bids?
Unsolicited bidding typically happens when a company needs to purchase one more company to:
- Control its market share.
- Profit from its expected growth.
- Approach proprietary technology.
- Limit contenders from exploiting these circumstances.
- Buy the target company and break it up.
Instructions to Avoid or Fight Off an Unsolicited Bid
A weak company might have several mechanisms with which to guard itself on the off chance that it turns into the target of an unsolicited offer or, eventually, a hostile takeover. In the first place, it can dismiss the offer outright. On the off chance that that doesn't work, there is the people poison pill defense, where the management of the target company takes steps to leave in the event of a takeover. This would force the acquirer to gather another management team assuming the acquisition was effective, which might be expensive.
Another defense mechanism is the poison pill, where shareholders buy more company stock at a discount, in this way raising the number of shares the bidder should purchase to understand the unsolicited bid. One more method for trying not to be a target is to set up an employee stock ownership plan, which would allow employees to buy shares in the company, subsequently enabling them to vote alongside management about important choices including the company.
True Example of an Unsolicited Bid
In 2018, Lundin Mining, a Canadian mining company, made several unsolicited offers to purchase individual miner Nevsun Resources. The last offer, made in July, was for a total of $1.4 billion CAD in a proposed all-cash deal. The deal was abandoned when another miner, China's Zijin Mining, made a competitive bid for Nevsun in the amount of $1.86 billion CAD.
The two companies sought after Nevsun in view of the time it would take for its Timok copper-gold project in Serbia to come online. Lundin abandoned its bid for Nevsun subsequent to choosing not to increase its offer, while Zijin's bid was effective.
Features
- Companies make unsolicited bids to control market share, increase profits, or potentially limit competition.
- Unsolicited bids are additionally alluded to as hostile takeovers.
- A company might dismiss the offer or set up an employee stock ownership plan to try not to be the target of an unsolicited bid.
- An unsolicited bid is made to purchase a company not actively seeking a buyer.
