Definition
A squeeze-out merger is a merger that forcibly cashes out minority shareholders. The controlling shareholder (often after a successful tender) merges the company into a wholly-owned subsidiary; minority holders receive cash (or sometimes other consideration) and lose their equity interest.
Mechanics
- Under Delaware §253 (short-form merger), available at ≥90% ownership without minority vote
- Under Delaware §251(h), available immediately after a successful tender that crossed the consummation threshold
- Minority holders have appraisal rights to challenge the consideration and seek “fair value” determined by the court
Why it matters
The squeeze-out is the legal mechanism that completes a take-private. Without it, a successful tender offer leaves a permanent minority that complicates governance, taxation, and any future transaction.
Distinction
Freeze-out is a related concept describing transactions that leave minority holders without effective economic participation; typically used in the controlling-shareholder context.