Tenderverfahren

What Is Tenderverfahren?

Tenderverfahren, often translated as a tender offer in English, is a specialized method used in corporate finance where a buyer, typically a company or an individual, makes a public solicitation to all shareholders of a target company. This invitation requests that they sell, or "tender," their equity securities or debt securities at a specified price and within a predefined timeframe. Unlike a standard market transaction, a tender offer is a direct proposal to shareholders, bypassing immediate open market purchases to achieve a specific ownership goal, such as a takeover or a stock buyback.

The price offered in a Tenderverfahren is usually set at a premium to the current market price of the securities, serving as an incentive for holders to sell their shares²⁵. This competitive bidding process is heavily regulated to ensure fairness and transparency for all participants.

History and Origin

The concept of tender offers evolved significantly with the growth of corporate control contests and mergers and acquisitions in the mid-20th century. Initially, such offers were largely unregulated, leading to concerns about coercive tactics and insufficient information for shareholders. In the United States, this prompted legislative action. The Williams Act, enacted in 1968 as an amendment to the Securities Exchange Act of 1934, provided the foundational regulatory framework for tender offers²⁴.

This legislation mandated disclosure requirements and procedural safeguards, aiming to protect investors by ensuring they receive adequate information and time to make informed decisions when faced with a tender offer²³. The rise of large investment banking firms in the 1970s further popularized the use of hostile tender offers as a strategic tool in corporate control battles²².

Key Takeaways

• A Tenderverfahren is a public offer to purchase a significant quantity of a company's shares or debt from its security holders at a specified price.
• The offered price typically includes a premium over the current market value to encourage participation.
• Tender offers are a common strategy for corporate takeovers, stock buybacks (issuer tender offers), or the repurchase of debt securities.
• In the U.S., these offers are strictly regulated by the Securities and Exchange Commission (SEC) to protect investors.
• Key requirements include remaining open for a minimum of 20 business days and providing comprehensive disclosure documents²¹.

Interpreting the Tenderverfahren

Interpreting a Tenderverfahren involves understanding the motivations behind the offer and its potential implications for the company and its security holders. When a third party initiates a tender offer, it often signals an attempt to gain controlling interest in the target company, potentially leading to a takeover²⁰. The premium offered above the prevailing market price reflects the bidder's perceived valuation of the shares and their willingness to pay for control or a significant stake.

Conversely, an issuer tender offer (a company buying back its own shares) might indicate that management believes its stock is undervalued, or it could be a strategy to reduce the number of outstanding shares, thereby increasing earnings per share and preventing dilution. Shareholders must assess whether the offered price aligns with their own valuation and investment goals, considering the offer's conditions and their implications.

Hypothetical Example

Consider "TechInnovate Inc." whose shares currently trade at $50 on the public exchange. "Global Conglomerate Corp." decides it wants to acquire a controlling stake in TechInnovate to expand its technology division. Instead of slowly accumulating shares on the open market, which could drive up the price and alert competitors, Global Conglomerate launches a Tenderverfahren.

Global Conglomerate announces an offer to purchase up to 51% of TechInnovate's outstanding shares at a price of $65 per share, representing a 30% premium over the current market price. The offer is conditional on Global Conglomerate acquiring at least 40% of the shares. TechInnovate's shareholders then have 20 business days to decide whether to "tender" their shares at the $65 price. If enough shares are tendered to meet or exceed the 40% minimum condition, Global Conglomerate will purchase the shares and gain significant influence or control over TechInnovate. If fewer than 40% are tendered, Global Conglomerate might extend the offer, raise the price, or withdraw the offer entirely.

Practical Applications

Tenderverfahren are employed in various financial contexts:

• Corporate Takeovers and Mergers and Acquisitions: A common application is when one company seeks to acquire another. A tender offer allows the acquiring company to directly solicit shares from the target company's shareholders, often as part of a larger strategy to gain control or merge the entities.
• Stock Buybacks: Companies use tender offers to repurchase their own shares from the market. This can reduce the number of outstanding shares, which typically boosts earnings per share and can signal management's confidence in the company's valuation.
• Debt Repurchases: Issuers can use tender offers to buy back their outstanding debt securities, such as bonds, before maturity. This may be done to reduce interest expenses, manage their debt profile, or take advantage of favorable market conditions. For example, Macy's Inc. recently announced an early tender result for its debt tender offer, aiming to repurchase senior debentures¹⁹.
• Government Securities Issuance: In some financial systems, governments or central banks may use a Tenderverfahren (often called an auction or Ausschreibungsverfahren in this context) to issue new government bonds or provide liquidity to financial institutions¹⁸.

These applications underscore the versatility of the Tenderverfahren as a tool for capital allocation and corporate restructuring.

Limitations and Criticisms

While a Tenderverfahren offers strategic advantages, it also carries limitations and faces criticism. One significant area of concern revolves around "mini-tender offers"—offers for less than 5% of a company's outstanding shares. These are often exempt from many of the Securities and Exchange Commission's comprehensive disclosure and procedural requirements, such as mandatory withdrawal rights or equal treatment provisions, which apply to larger tender offers. ¹⁷This regulatory loophole can lead to situations where uninformed investors sell their shares at a discount to the prevailing market price, as material terms may be less transparent.
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Another limitation can arise in competitive bidding scenarios. Target company management opposition or the presence of a competing bid can significantly decrease the probability of a tender offer's success. ¹⁵Furthermore, while a premium is typically offered, shareholders might feel pressured to accept an offer, fearing that if the tender offer is successful without their participation, their remaining shares could suffer from reduced liquidity or potential delisting. Research suggests that factors such as the bid premium and pre-bid ownership can increase success, while hostile reactions can impede it.
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Tenderverfahren vs. Auktion

While both a Tenderverfahren and an Auktion involve a competitive bidding process, their mechanics and implications differ significantly.

In essence, a Tenderverfahren offers a more controlled and less immediate environment for a sale or acquisition, allowing for greater negotiation and the inclusion of specific conditions. An Auktion, conversely, emphasizes immediate and open competition, often leading to a quicker conclusion if buyer interest is strong.
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FAQs

What is the primary purpose of a Tenderverfahren?

The primary purpose of a Tenderverfahren is for a party, such as an acquiring company or an issuer, to purchase a significant quantity of equity securities or debt securities directly from security holders within a set timeframe and at a predetermined price, often above the market rate. This is commonly done for corporate takeovers or stock buybacks.

How long does a Tenderverfahren typically last?

In the United States, under Securities and Exchange Commission regulations, a tender offer must remain open for at least 20 business days from its commencement. The offer period can be extended, especially if certain conditions are not met within the initial timeframe.
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Are all Tenderverfahren successful?

No, not all Tenderverfahren are successful. Success depends on various factors, including the attractiveness of the offered premium, any conditions attached to the offer (e.g., a minimum percentage of shares tendered), management's reaction to the offer, and the presence of competing bids. Shareholders are not obligated to tender their shares.¹