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Simple English definitions for legal terms
freeze-out merger
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A quick definition of freeze-out merger:
A freeze-out merger is when one company buys another company's stock and forces the other company's shareholders to sell their shares for cash. This means that the company being bought out no longer exists and its shareholders no longer own any part of it. It's like if you had a toy and someone else wanted it, so they gave you money for it and took it away from you.A more thorough explanation:
A freeze-out merger is a type of cash merger in which shareholders of the target company are forced to accept cash for their shares. This type of merger is also known as a cash-out merger.
For example, if Company A wants to acquire Company B, it may offer to buy all of Company B's outstanding shares for a certain price per share. If Company A acquires enough shares to gain control of Company B, it may then force the remaining shareholders to sell their shares for the same price per share. This effectively "freezes out" the remaining shareholders and allows Company A to take full control of Company B.
Freeze-out mergers are often used by larger companies to acquire smaller companies or to eliminate minority shareholders who may be opposed to a merger or acquisition.