Definition
A coercive tender offer is structured in a way that pressures shareholders to tender even if they prefer not to — typically by creating economic disincentives to non-tendering.
Common coercive structures
- Two-tier offers — front-end at high price, back-end at lower price; non-tendering holders risk being squeezed at the lower back end
- Partial offers — front-end for less than 100%; non-tendering holders risk owning a minority stake in a now-controlled company
- Time-limited offers with no extension if oversubscribed
Regulatory and structural responses
- All-holders / best-price rule (Rule 14d-10)
- Pro-rata acceptance in partial offers (Rule 14d-8)
- State fair-price provisions
- Mandatory bid rules in non-U.S. jurisdictions
Why it matters
Modern friendly tenders are explicitly designed not to be coercive (uniform front-to-back pricing, often via §251(h) for clean back-end). Coercive structures still appear in some hostile contexts and trigger heightened judicial scrutiny under Unocal.