Definition
A bear hug is a public letter from a would-be acquirer proposing to buy the target at a substantial premium, deliberately disclosed to put pressure on the target board to engage. The bidder doesn’t go directly to shareholders (which would be a hostile tender offer) but creates strong shareholder pressure on the board to respond.
Mechanics
- Bidder sends an “interested in acquiring you at $X per share” letter
- Bidder publicly discloses the letter (often via SEC filing or press release)
- Shareholders see a premium offer on the table; board now under intense pressure
- Board must publicly respond — engage, reject, or accept
Why it matters
A bear hug is a softer step before a hostile tender offer. It signals the bidder is serious without yet incurring the cost and risk of a fully hostile bid. Boards often engage after a bear hug to negotiate a better-structured deal rather than face a hostile tender.
Variant
A double bear hug layers on additional public pressure — e.g., committing to higher prices or financing certainty.