What does the term "tender offer" refer to in financial contexts?

The term "tender offer" refers specifically to an offer made by an individual or company to purchase some or all of shareholders' shares at a specified price, usually at a premium over the current market price. This process is often used as a strategy for acquiring control of a company.

In a tender offer, the acquiring party solicits shares directly from the shareholders, bypassing management and board approval, which can give shareholders an attractive alternative to sticking with the existing company management. It is a formal process that may be seen during mergers and acquisitions, where an entity aims to increase its ownership in another company or take it over completely.

Tender offers can attract shareholder interest by providing a premium valuation of the stock, prompting shareholders to sell their shares to the offeror at the specified price. This process helps the acquiring company gain a larger stake in the target company, which can be crucial in gaining control or effecting a significant change in the target's business strategy.