Advanced Financial Management · Regulatory framework and processes

Takeover Bid Process, Timetable and Offer Terms for ACCA AFM

Updated 11 October 2026 · Fact-checked

A takeover bid is a structured sequence: approach and target selection, due diligence, an offer to the target's board or shareholders, an offer document, an acceptance period, and completion once enough shares are acquired. In AFM you explain each stage, the offer terms, and the acceptance levels that give control.

Understand Bid Process, Timetable and Offer Terms

A takeover is a purchase of control of a target company. The bidder buys enough voting shares to direct its board and policy. It can do this by agreement with the target's board (a recommended or friendly bid) or by going straight to shareholders against the board's wishes (a hostile bid).

The process runs in stages. First the bidder sets its strategy and screens targets for fit, synergies and affordability. It then makes an approach, often privately to the target's board. If the board is willing, the bidder is allowed due diligence: a detailed check of the target's finances, legal position, tax, contracts, operations, people and risks. Its purpose is to confirm the value, find hidden liabilities and set the price. It also tests whether the synergies are real.

Next comes the formal offer. The bidder sets the offer terms: the price, and the form of payment (cash, shares in the bidder, loan notes, or a mix). It also sets conditions, such as a minimum acceptance level, regulatory clearance and no material adverse change in the target. These are written in the offer document, which goes to the target's shareholders. The target board gives its own view and advice, and may use defence tactics if it opposes the bid.

The offer then stays open for a set acceptance period. Shareholders accept or ignore it. Acceptance levels matter because they decide the bidder's power. Over 50% gives control of ordinary resolutions. About 75% allows special resolutions. A high level, such as 90% in many jurisdictions, may let the bidder buy out the remaining holders compulsorily. The exact thresholds and timetable depend on the local takeover rules, so quote them as examples unless the question gives them.

Completion happens when the conditions are met. Shares transfer, consideration is paid or issued, and the target is integrated. The exam is written, so the best answers link each stage to the scenario: why the stage matters, what could go wrong, and what advice you would give.

Key rules to remember

Offer value per target share (share exchange): Offer value = Exchange ratio × Bidder's share price; Exchange ratio is bidder shares offered per target share. The value moves as the bidder's price moves.
Offer value per target share (mixed offer): Offer value = Cash per share + (Exchange ratio × Bidder's share price); Use for cash plus share offers. State the date of the share price used.
Total consideration: Total consideration = Offer value per share × Number of target shares acquired; Use shares actually acquired when the bid is for less than 100%.
Premium offered: Premium % = (Offer price − Pre-bid market price) ÷ Pre-bid market price × 100; Use the undisturbed price from before the bid became known.
Shares needed for a given acceptance level: Shares needed = Acceptance % × Target shares in issue; Include shares the bidder already holds when testing a threshold.

How to solve Bid Process, Timetable and Offer Terms questions

Use this method for any question on the bid process, timetable or offer terms. It keeps your answer tied to the requirement and the scenario.

1Read the requirement and mark the verb: explain, advise, evaluate or calculate. It decides how much theory and how much numbers.
2Identify whether the bid is friendly or hostile, and which stage the scenario has reached.
3Set out the stages in order that matter to the case: approach, due diligence, offer terms, offer document, acceptance period, completion.
4For each stage, apply it to the scenario with named facts such as the target's debt, the sector or the bidder's cash position.
5If numbers are given, calculate offer value, premium, total consideration and the shares needed for control, and show workings.
6Comment on acceptance levels: what the bidder reaches at each threshold and what powers it gains.
7Flag risks and conditions, such as regulatory approval, target defences and overpaying.
8Finish with a clear recommendation or conclusion that answers the requirement, in professional tone.

Quickest way: Stage, term, threshold check

When to use it: Use when time is short and the question asks you to outline the process or advise on a bid in a few minutes.

Write the stage headings in order down the page: approach, due diligence, offer, document, acceptance, completion.
Add one scenario-specific point under each heading.
Do one line of numbers: offer value and premium.
Add the control thresholds and the shares needed.
Close with one risk and one recommendation.

Common mistakes in Bid Process, Timetable and Offer Terms

Listing the bid stages generically without applying them to the scenario.
Students memorise a textbook sequence and write it out.
Fix: Add a case fact to every stage, such as what due diligence should check in this target.
Treating due diligence as only a financial audit.
The word 'diligence' suggests checking the accounts.
Fix: Cover legal, tax, commercial, operational, environmental and people issues, and say how findings change price or terms.
Mixing up the thresholds for control.
Students quote one number for all jurisdictions.
Fix: State that over 50% gives ordinary resolution control and about 75% special resolutions. Treat compulsory purchase levels as set by local rules, and use the figure the question gives.
Valuing a share offer at a fixed amount.
The exchange ratio is converted once and forgotten.
Fix: Say the value depends on the bidder's share price and show the calculation at the stated price.
Calculating the premium against the wrong price.
Students use the price after the bid is announced.
Fix: Use the undisturbed pre-bid price unless the question says otherwise.
Ignoring the target board's response in a hostile bid.
Students focus only on the bidder's actions.
Fix: Add a line on the target's advice to shareholders, possible defences and how the bidder could raise or improve terms.

Worked examples

Example 1

Alpha plans a share-exchange offer for Beta. Beta has 40 million shares at a pre-bid price of $2.50. Alpha's share price is $5.00. Alpha offers 1 Alpha share for every 2 Beta shares plus $0.30 cash per Beta share. Calculate the offer value per Beta share, the premium, and the total consideration if all shares are acquired.

Show the solution

Share element: 0.5 × $5.00 = $2.50.
Cash element: $0.30.
Offer value per share = $2.50 + $0.30 = $2.80.
Premium = ($2.80 − $2.50) ÷ $2.50 × 100 = 12%.
Total consideration = $2.80 × 40 million = $112 million.
Of this, cash = $0.30 × 40 million = $12 million, and shares issued = 0.5 × 40 million = 20 million Alpha shares worth $100 million.

Answer: Offer value is $2.80 per Beta share, a 12% premium, giving total consideration of $112 million ($12 million cash and 20 million new Alpha shares). The share element's value will change if Alpha's price moves.

Example 2

Gamma makes a hostile bid for Delta, which has 80 million shares in issue. Gamma already holds 10 million Delta shares. Explain how Gamma should plan its offer, and calculate how many further shares it needs to reach 50% and 75% of Delta's shares.

Show the solution

Approach: with a hostile bid Gamma goes straight to Delta's shareholders with an offer document, since the board will not recommend it. Gamma has no access to due diligence, so it must rely on public information and should allow for hidden risks in its price.
Offer terms: set price, form of payment and conditions, including a minimum acceptance level and regulatory clearance. A clear premium to the undisturbed price helps persuade shareholders.
Delta's response: expect the board to advise rejection and possibly use defences. Gamma should be ready to improve terms and to explain its strategic case.
50% threshold: 0.5 × 80 million = 40 million shares. Gamma needs 40 million − 10 million = 30 million more, plus at least one share to be over 50%.
75% threshold: 0.75 × 80 million = 60 million shares. Gamma needs 60 million − 10 million = 50 million more.
Conclusion: Gamma should set its minimum acceptance condition with the 50% and 75% levels in mind, and decide whether it would waive it.

Answer: Gamma needs just over 30 million further shares to pass 50%, and 50 million further shares to reach 75%. Because the bid is hostile and due diligence is limited, Gamma should price cautiously, set clear conditions and be ready to raise its offer.

Exam tips

Answer in the order of the timetable. It gives your answer a clear structure and earns marks for logic.
Always apply a point to the scenario. Generic stage lists earn few marks, and professional skills marks reward application.
Show the premium and offer value workings even if the question mostly asks for discussion.
Name the control thresholds, but use the figures given in the question if they differ from your memory.
If the question asks for advice, end with a clear recommendation and the main risk to it.

Practice questions from Regulatory framework and processes

Bid Process, Timetable and Offer Terms: frequently asked questions

What are the main steps in a takeover bid?

The bidder selects a target, makes an approach, carries out due diligence if allowed, and sets the offer terms. It then issues an offer document, keeps the offer open for an acceptance period, and completes once the conditions are met.

How does a hostile takeover bid work?

The bidder bypasses the target's board and offers directly to shareholders, usually at a premium. The board advises shareholders and may use defence tactics. The bidder succeeds if enough shareholders accept.

Why is due diligence important in an acquisition?

It checks that the target is worth the price and exposes hidden liabilities. It covers financial, legal, tax, commercial and operational matters. The findings can lead to a lower price, changed terms or withdrawal.

What acceptance level does a bidder need?

Over 50% gives control of ordinary resolutions, and about 75% allows special resolutions. Some jurisdictions allow compulsory purchase of remaining shares at a higher level. Use the thresholds the question gives.