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Could your company face a bear hug deal?

On Behalf of | Jan 26, 2023 | Mergers & Acquisitions

Your initially modest start-up grew organically by leaps and bounds. Soon, it attracted the attention of some heavy hitters in your industry. It’s now apparent that your company is the target of a larger corporation seeking a deal to acquire it.

But what if you don’t want to sell? Public companies with responsibilities to shareholders are bound by their fiduciary duties to consider all offers that are in the best interest of those shareholders and the company itself.

A bear hug could force your hand

Last year, the whole world saw the consequences of a corporate bear hug play out in real-time when eccentric billionaire Elon Musk acquired Twitter in a controversial deal. While the jury is still out on the long-term success of that move, it illustrated the powerful force a bear hug can exert on a corporate board that had thus far been unwilling to be acquired.

Are you being bear-hugged?

If the bid from the acquiring company is far above the price per share market value of your stock, that’s a good sign it’s a bear hug. They’re forcing your board’s hand, as failing to act can lead to shareholder uprisings, litigation and proxy wars.

Steps to take after a bear hug

CEOs and board members are free to seek a white knight deal that is more favorable to their aims. They can also challenge the stock valuation and make credible cases that the stock’s worth is higher. There are always options available.

The main takeaway is to remain informed and well-advised during all stages of the proposed acquisition of your company.