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what is a bear hug in business

A bear hug in business refers to a hostile takeover attempt in which the acquiring company makes a very generous offer to the target company’s shareholders in an effort to convince them to sell their shares. The term “bear hug” is used because the acquiring company is trying to embrace or “hug” the target company in a friendly manner, even though the takeover attempt may be perceived as aggressive or hostile.

Bear hugs are often used when the acquiring company believes that the target company is undervalued or underperforming, and they see an opportunity to improve the target company’s operations and increase shareholder value. Bear hugs are often accompanied by a premium offer, meaning that the acquiring company is willing to pay a higher price for the target company’s shares than their current market value.

Bear hugs can be successful if the target company’s shareholders are convinced that the acquiring company’s offer is in their best interests. However, they can also be unsuccessful if the target company’s management and board of directors are opposed to the takeover or if the target company’s shareholders believe that the offer is not fair or reasonable.