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Hostile tender offers have captured broad public attention. Almost every businessman, business lawyer, and student of corporate law knows the basic script. A bidder, often described pejoratively as a raider, makes a public tender offer to purchase a controlling block of the stock of another corporation, known as the target. Target management opposes the offer, but because board approval is not necessary to complete a tender offer, the decision rests in the hands of the target shareholders. If enough of the target shareholders tender, the bidder gains control, and any remaining shareholders are cashed out in a merger between the target and some other entity controlled by the bidder.
Hostile tender offers have generated a great deal of controversy. Critics claim they are bad for employees, bad for the communities in which the target corporation is located, bad for the target's debt-holders, bad for the long-term development of the economy, and even bad for the bidding firm. This Article focuses on the argument that hostile tender offers are bad for the constituency affected most directly-the target shareholders.