A bidder wants 51% of a target's stock fast, so it offers cash to every shareholder at a premium. The moment that offer goes public, a web of disclosure, timing, and fair-treatment rules switches on. Know which rule governs the bid, the response, and the vote, and you own this scope.
A tender offer is a public, broad offer to buy a large block of a company's shares, usually at a premium and within a set window. Before 1968, a raider could sweep up control before holders knew what was happening. The Williams Act fixed that by amending the Securities Exchange Act of 1934 with disclosure and timing rules. Two SEC regulations implement it: Regulation 14D (filing and disclosure) and Regulation 14E (anti-fraud and conduct).
The core promise is that every shareholder of the targeted class learns the same facts at the same time and gets a fair shake. Pre-commencement communications must be filed (see Regulation M-A below).
Rule 14d-1 sets the scope and definitions. Regulation 14D applies to third-party tender offers for a class of equity registered under Section 12 once the bidder would hold more than...
Common mistakes
- Using calendar days for the 20-day rule. The minimum tender-offer period is 20 business days, and a price or percentage change adds 10 business days, never calendar days.
- Requiring a fiduciary breach for Rule 14e-3. Rule 14e-3 catches mere possession and trading on tender-offer information once substantial steps are taken. No breach of duty is needed, unlike 10b-5.
- Confusing 13e-3 and 13e-4. 13e-4 is an issuer tender offer (buyback by tender). 13e-3 is a going-private transaction. Candidates swap these constantly.
Bottom line
- The Williams Act added Sections 13(d), 13(e), 14(d), 14(e), and 14(f) to the 1934 Act to regulate tender offers and large stake accumulation
- A tender offer must stay open at least 20 business days (Rule 14e-1); a change in price or percentage sought requires at least 10 more business days
- Rule 14d-10 imposes the all-holders rule (offer open to every holder of the class) and the best-price rule (every tendering holder gets the highest price paid to any)
- Rule 14e-3 bars trading on material nonpublic information about a tender offer once substantial steps are taken; no fiduciary breach is required
Exam shortcut
Two clocks, both business days: 20 business days minimum to keep an offer open, 10 business days added for any price or percentage change. Calendar days are wrong answers. Number maps to actor: 14d/14e is a third-party offer, 13e-4 is the issuer buying its own stock, 13e-3 is going private. Schedule TO files under 14(d)(1) for outsiders and 13(e)(1) for issuers.
The full lesson (about 2,826 words, 19 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- C25
- C26
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