Why do companies who want to acquire a target company, go for tender offer & want to pay a premium to the existing shareholder, when they can just buy the required quantity without premium FROM the open market?

Question

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In: Economics

Answer 1

Because you need the control a majority of the shares to buyout a company, and there aren’t that many shares on the open market available to purchase.

Most companies have a buyout clause where a buyout offer can be approved by the board and/or the shareholders, forcing all shareholders to sell even if their shares weren’t on the market originally.