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Glossary

Takeover

A takeover is a transaction in which one company acquires enough shares or voting power to gain control of another company, often by buying its stock at a premium to the market price.

What Is a Takeover?

A takeover occurs when one company, investor or group gains control of another company. Control generally means holding enough voting shares to elect the board of directors and steer major decisions. Takeovers are a form of mergers and acquisitions, and they can be agreed by both sides or pursued against the target's wishes.

How a Takeover Works

Most takeovers begin with a bid. A friendly takeover is negotiated with the target's management and board, which typically recommend the offer to shareholders. A hostile takeover is pursued without that support, often through a tender offer that invites shareholders to sell their shares directly, or through a proxy fight to replace the board.

Bidders usually offer a premium above the current share price to persuade shareholders to sell. Before bidding, an acquirer commonly completes due diligence to examine the target's finances, contracts and risks. Targets facing an unwanted bid sometimes adopt a poison pill, a defensive measure that makes the takeover more expensive for the bidder.

An Example

Suppose Company A offers to buy all outstanding shares of Company B at a price 25% above Company B's recent trading price. If enough shareholders accept, Company A gains control of Company B and can replace its board. This is a hypothetical illustration, not a description of an actual deal.

Why Takeovers Matter to Investors

Takeovers can have significant effects on shareholders. Target shareholders often receive a premium over the prior market price, but the deal may also end their ownership or change the company's strategy. Shareholders of the acquiring company may see the purchase price, any new debt, and the integration plan affect the value of their holdings.

Takeover news often moves the target's stock sharply. While a bid is pending, the target's shares often trade close to the offer price, which reflects the market's view of whether the deal will close. Deals can fail if regulators object, shareholders reject the offer, or financing falls through.

Updated October 23, 2026. For general education only; not financial, tax or legal advice.

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Related Terms

Mergers and Acquisitions (M&A)

Mergers and acquisitions is the broad term for transactions in which companies combine with, or take ownership of, other companies, assets, or business units to change their size, structure, or strategy.

Tender Offer

A tender offer is a public proposal by a company, investor, or other party to buy shares directly from shareholders at a stated price, usually for a set period of time.

Proxy Fight

A proxy fight is a contest in which a group of shareholders tries to win votes from other shareholders to elect its own directors or pass a proposal, without necessarily buying control of the company.

Premium

A premium is an amount paid above a base value, such as the regular payment for insurance coverage, the price of an option contract, or a price above a bond's par value.

Due Diligence

Due diligence is the investigation and verification a person or firm performs before committing to a transaction, such as buying a company's shares or acquiring a business, to confirm facts and identify risks.

Poison Pill

A poison pill is a shareholder rights plan that a company's board adopts to make a hostile takeover more expensive by letting existing shareholders buy discounted shares if one investor builds a large stake.

Hostile Takeover

A hostile takeover is an attempt to acquire a publicly traded company against the wishes of its current management and board, typically by buying shares directly from shareholders or launching a tender offer.