Simple English definitions for legal terms
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Bear hug: A way for one company to take over another company by offering to buy their shares for a much higher price than they are worth. This can be a hostile tactic to force the other company to accept the offer. The reverse bear hug is when the target company responds by saying they are willing to negotiate, but only if the price is much higher than what was offered. This is often used as a way to prevent a takeover.
Definition: Bear hug is a term used in business to describe a takeover strategy where the acquiring company offers a price per share that is much higher than the current market value. The intention is to pressure the target company into accepting the offer.
Example: Company A wants to acquire Company B. Company A offers to buy Company B's shares at $50 per share, even though the current market value is only $30 per share. This is a bear hug strategy because Company A is offering a much higher price than what Company B's shares are currently worth, hoping that Company B will feel pressured to accept the offer.
Reverse Bear Hug: Sometimes, the target company may respond to a bear hug offer by showing a willingness to negotiate but demanding a much higher price than what was offered. This is called a reverse bear hug and is usually an anti-takeover tactic.
Example: In response to Company A's bear hug offer, Company B may say that they are willing to negotiate but will only accept an offer of $80 per share. This is a reverse bear hug because Company B is demanding a much higher price than what Company A offered, making it more difficult for Company A to acquire Company B.
These examples illustrate how bear hug and reverse bear hug strategies are used in business to acquire or defend against takeovers. They show how companies can use different tactics to try and gain an advantage in a takeover situation.