Bear hug is really something you expect a financial advisor to offer you, but it does happen between businesses (cute, huh?).
A bear hug refers to an overly generous purchase offer from one company to another. Usually this is done when the target company (the one being pursued) is anticipated to be reluctant to sell. It's designed to put the target company management in a position where they have to sell, because if they don't accept all that extra cash, they're not looking after their shareholders in the best way possible financially (costing them money, in essence).
Despite the cuddly name, this is considered a form of hostile takeover because of the position it puts the target company in. It's like starting with a hug, but ending in a forced hand (talk about passive aggressive, right?).
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Finance: What is a Bear Hug?7 Views
Finance a la shmoop what is a bear-hug? well you remember old uncle [Uncle Larry appears]
Larry right the former 350 pound Olympic wrestler who could braid his own chest
hair yeah kind of gross but no that's the guy well he got out of the bathtub [Larry in a bath tub]
once while y'all were at your ski cabin in Wyoming and a real bear saw him
through the window and well simply put fell in love yeah that's how
Bears do it well Larry went over to the bear family [Larry wearing bear fur]
for Christmas and when he walked in a little bear dude guy screamed Mom, there's a
human in the cave but Larry fit right in he hugged each of the Bear Jamboree [Larry hugging a bear]
family really hard they wanted to call it a human hug but well somehow the name
didn't stick so uncle Larry is that guy well he hugged at Christmas
bears humans and whatever he hugged hard.. hard enough to squeeze the air out of
anyone or anything and if he suddenly let go well you had a really hard time [Larry lets bear go and bear struggles to breathe]
catching your breath well that's the setting of a Wall Street bear hug, a big
hairy powerful player often recently bathed ideally yeah not still in the
bathtub making a bid to buy a weaker competitor at a price substantially
higher than the current market price of the target it's a hug and the target had [Larry chasing a man for a hug]
better hugged back and be acquired or else why because if the bear hugger
suddenly lets go while the target falls back from the $28
a share of the bear is offering to buy it falls all the way back to the 15
dollars it was trading at before all that you know hugging started and if the
bear walks away and the company just languishes at 15 bucks a share without [Bear walks away with company]
any other bidders.. the board gets their pants sued off by shareholders who
are just "robbed" of $13 a share in gains likely meaning that the
entire company reboots and in hindsight well that it would have been oh so much
better to let Larry just move into the cave where you know he really felt at [Larry in the cave with bears]
home with everyone there check out those salmon..
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