Glossary of key takeover terminology

The table below contains some terms which are regularly encountered in commercial practice.  The terms and their meanings are provided as a guide only and are not intended to be definitive.

Comments on the meaning of terms in this glossary, or suggestions for additional terms, can be provided to the Panel executive at:

In this glossary:

  • we use “offer” to mean a proposal by a bidder to acquire all, or a proportion, of the issued share capital of a target company by way of bid or scheme
  • we use “company” as a reference to companies and listed managed investment schemes
  • we use “shares” as a reference to shares in a company and units or other interests in a listed managed investment scheme and
  • section references are to sections of the Corporations Act 2001 (Cth), unless otherwise noted.

602 principles

The principles contained in section 602, which include the Eggleston principles (paragraphs (b) and (c) below) and the Masel principle (paragraph (a) below).  The principles set out the objectives of the takeover provisions in the Corporations Act, which are that:

  1. the acquisition of control over the shares in a company takes place in an efficient, competitive and informed market
  2. the holders of shares and the directors of the company:
    • know the identity of any person who proposes to acquire a substantial interest in the company
    • have a reasonable time to consider the proposal and
    • are given enough information to allow them to consider the merits of the proposal
  3. as far as practicable, the holders have a reasonable and equal opportunity to participate in any benefits accruing to the holders through a proposal under which a person would acquire a substantial interest in the company and
  4. an appropriate procedure is followed as a preliminary to compulsory acquisition.

asset lock-up

An arrangement between a bidder and target for the sale, purchase or encumbrance of an asset (often the crown jewels) in exchange for:

bear hug

Where a bidder approaches a potential target stating (privately or publicly) that it will make an offer (usually at a control premium) only if it receives a favourable recommendation from the target’s board of directors.

BIA or bid implementation agreement

An agreement, often including one or more lock-up devices, entered into between a bidder and target setting out the key terms and conditions on which the bidder agrees to bid for the target and the target’s obligations to recommend the bid.

bid or takeover bid

An exception to the takeover prohibition involving a formal proposal by a bidder to acquire all (or a proportion) of the securities in a target company from the target company’s security holders which the bidder does not already own or control.  A bid may be a market bid or an off-market bid.  See section 616.

bidder’s statement

See section 636.  A disclosure statement prepared by a bidder which contains all information known to the bidder which is material to a decision by a target security holder whether or not to accept a bid.2

break fee

Consideration however payable by a target if specified events occur which prevent a bid from proceeding or cause it to fail.3

broker valuation

A valuation prepared by a broker for a bidder (target) to indicate that the offer price is at a premium (discount) to the share price or value.4

buy back

An acquisition by the company of shares in itself.  See section 9.

collateral benefit

A benefit that is not offered to other bid class security holders which is likely to induce the person or an associate to accept an offer under the bid or to dispose of the securities in the bid class.  See section 623.

compulsory acquisition

A statutory process by which a shareholder that owns 90% or more of a company can compulsorily acquire the remaining shares in the company.  See section 661A, section 662A, section 663A and section 664A.

control premium

The amount paid or offered by a bidder above the prevailing market price of a target company's shares to obtain control of a target company.

control transaction

A transaction which affects or is likely to affect control or potential control of a company or the acquisition or proposed acquisition of substantial interest in a company.5


An exception to the takeover prohibition which allows a person to acquire up to a further 3% of a company's issued share capital in any 6 month period, provided that, as a result of the acquisition neither that person nor any other person would have voting power in the company more than 3% higher than they had 6 months before the acquisition.  See item 9 of section 611.

crown jewels

A key asset or assets of a company.

deal protection measures

See lock-up device.


A form of corporate restructure in which shareholders in a parent company gain direct ownership in a subsidiary company that they formerly owned indirectly through that parent company (being the ‘demerged company’).

downstream acquisition

An acquisition of a relevant interest in the shares of a downstream company as a result of an acquisition of relevant interests in a listed entity.6

due diligence

The process of investigating the operational, financial and other aspects of a company before entering into a transaction with that company.

Example: A bidder may undertake due diligence on a target company before making an offer to investigate matters that may be relevant to the future success and profitability of the target company.

Eggleston principles

A set of principles formulated by the Company Law Advisory Committee in 1969 (named after the committee's chairman, Sir Richard Eggleston) which provide the philosophical basis of the present takeover legislation and which form part of the 602 principles.

equality principle

Under section 602(c) if there is a proposal for the acquisition of a substantial interest, then, as far as possible, the holders of the relevant class of voting shares must all have a reasonable and equal opportunity to participate in any benefits.7

equity derivative

A financial instrument whose value is based on equity movements of the underlying asset, for example, an index derivative or a derivative over a basket.8


A pre-bid purchase, within the 6 months before the bid is made or proposed, which gives the seller a benefit that depends on the value of the consideration to be offered under the bid. See section 622.


The target giving a bidder certain exclusive negotiation and dealing rights before and after a bid is announced.

‘fiduciary out’

A provision which allows the directors of a party to be relieved of a lock-up obligation (or aspects of it) if their duties require them to do so.9

friendly bid

A bid that is recommended by the target's board of directors (often recommended “in the absence of a superior offer”).

frustrating action

An action by a target, whether taken or proposed, by reason of which a bid may be withdrawn or lapse or a potential bid is not proceeded with.10

go shop

A clause in an agreement between a target and a potential bidder which specifies a period of time during which the target is entitled to solicit a competing proposal.

golden parachute

An agreement between a company and an employee (usually a key employee) which gives the employee the right to terminate his or her employment and receive a substantial termination payment in the event of a hostile bid.11  Can operate as a poison pill.


The practice of purchasing shares in a target company to prevent a bidder being able to proceed to compulsory acquisition and so forcing the bidder to buy those shares at a premium to gain 100% of the target.

hostile bid

A bid which the directors of the target recommend that shareholders do not accept.


Either or both of:

  • any officer or adviser of a target company who is in a position to influence the target’s consideration of the bid
  • any person with significant non-public information in relation to the target or its business obtained through that person’s role as an officer or adviser, or former officer or adviser, of the target.12

insider trading

Buying or selling of securities in a company by someone who has non-public, price sensitive information.

lock-up device

An arrangement that encourages or facilitates a control transaction and potentially hinders another actual or potential control transaction.13  Examples include by imposing a restriction on actions of the target (or a shareholder), as in a no shop agreement or no talk agreement or by providing for compensation if the control transaction does not proceed, as in a break fee.  Other examples include:

long position

Either a long equity derivative position or a relevant interest in securities or a combination of both.14

MAC or material adverse change

A common condition of an offer which provides that the bidder may withdraw its offer if any change occurs that has a material adverse effect on the business, assets, financial or trading position, or profitability of the target.15

Example: A bidder may seek to rely on a MAC condition if the target announces a profit downgrade of 20% or a major natural disaster destroys the target's key asset, each during the offer period.

market bid or on-market bid

A type of bid in which a stockbroker acting on behalf of the bidder offers to acquire shares in the target on-market at a specified price (being the offer price).  Any increase in consideration during the bid is not given to shareholders who have already accepted (in contrast to an off-market bid).

market check

A clause allowing the target to announce that it will entertain third-party interest for a reasonable set period, after which it proposes to deal with the bidder.  Used, for example, in management buy-outs as a way of testing the fairness of the proposal by proving the market for other offers.16

market maker

A writer of equity derivatives who is:

  • an Australian Financial Services Licensee authorised to provide arm’s length, professional, intermediary services or
  • the holder of an equivalent licence to an Australian Financial Services Licence in a jurisdiction with equivalent regulatory supervision.17

Masel principle

One of the 602 principles which states that the acquisition of control over the shares in a company must take place in an efficient, competitive and informed market.  It was named after its contributor, Mr Leigh Masel, who was the then chairman of the National Companies and Securities Commission.

matching right

A clause in an agreement between a target and a potential bidder that provides the potential bidder with the right to match or better a competing proposal made for the target.

maximum acceptance condition

A condition that provides that the offers will terminate, or the maximum consideration offered under the bid will be reduced, if one or more of the following occur:

  • the number of securities for which the bidder receives acceptances reaches or exceeds a particular number or
  • the bidder’s voting power in the company reaches or exceeds a particular percentage or
  • the percentage of securities the bidder has relevant interests in reaches or exceeds a particular percentage of securities in that class.

See section 626.

media canvassing

A party directly or indirectly causing, participating in or assisting the canvassing in any media of any issue that is before (or likely to be before) the Panel in proceedings.18

merger of equals

The combination (by bid or scheme) of two companies of approximately the same size.

minimum bid price rule

Consideration offered for securities in the bid class under a bid must equal or exceed the maximum consideration that the bidder or an associate provided, or agreed to provide, for a security in that bid class under any purchase or agreement during the 4 months before the date of the bid.19  See section 621(3).  

'naked no vote' break fee

A break fee payable in a scheme if the target shareholders do not approve the scheme.

no due diligence

A clause in an agreement between a target and a potential bidder that restricts the target from granting due diligence access to potential competing bidders without the first bidder’s consent.20

no shop

A clause in an agreement between a target and a potential bidder which prevents the soliciting of alternatives, usually during a defined period of exclusivity.21

no talk

A clause in an agreement between a target and a potential bidder which prevents a target negotiating with any potential competing bidder.  It might be graduated from the least restrictive form (allowing negotiations if the approach was unsolicited) to the most restrictive form (no negotiations, even if the approach was unsolicited).22


A right that can cannot be transferred to a third party.23

off-market bid

A type of bid in which each shareholder in the target company receives a letter of offer from the bidder which the shareholder must sign and return in order to accept the bid.  Any increase in bid consideration is given to shareholders who have already accepted the bid (in contrast to a market bid).

offer period

The time that a bid is open for acceptance by target shareholders.  See section 624.

participating insiders

Insiders who are given an understanding by, or enter or propose to enter into an agreement with, a potential bidder that they will gain or benefit from the bidder making a successful bid.24  

poison pill

A strategy implemented by target companies before a bid is announced to thwart hostile takeovers by making the target's shares prohibitively expensive or the target otherwise unattractive to a bidder.

A common “poison pill” in the United States (where the concept was created in the 1980s) is a shareholder rights plan, which typically gives existing shareholders of a target company (excluding the bidder) the right to buy shares in the target at a discount (usually for nominal consideration) once the bidder acquires control, thus diluting the interest of the bidder and raising the cost of the bid. The “poison pill” term is loosely used in Australia to refer to any transaction or arrangement which makes a target unattractive, such as pre-emptive rights or share top-up rights which are triggered in a hostile bid.

pre-bid stake

Acquisition of shares in the target company (up to the 20% limit) prior to making a bid

private equity fund

An investment fund that has a mandate to take controlling positions in companies to increase their profitability and then sell the company later at a profit.


A statement by a director about whether a shareholder should accept an offer or not.25

redemption scheme

The merger of managed investment schemes by one (target) redeeming all the interests of holders except interests held by the other (acquirer).26

relevant interest

A person will have a relevant interest in securities if they are the holder of the securities, they have the power to exercise, or control the exercise of, a right to vote attached to the securities or they have the power to dispose of, or control the exercise of a power to dispose of, the securities. See sections 608 and 609.


A right that can be transferred to a third party.27

restriction agreements

An agreement that restricts the ability of the target (or a shareholder) to act.28

reverse break fee

A fee payable by a bidder to a target (to compensate the target for the costs and expenses of the bid or scheme) where the bidder causes the bid or scheme to fail or allows it to lapse.

reverse takeover

A takeover where the bidder seeks to acquire a target for scrip consideration which results in the target shareholders becoming the majority shareholders of the combined entity.

rights issue

An issue by the company of new shares offered to shareholders in proportion to their existing holdings, which may be renounceable or non-renounceable, and may be underwritten or non-underwritten.29

scheme or scheme of arrangement

A court supervised arrangement between a company and its shareholders, which is an exception to the takeover prohibition and an alternative to a bid.

scrip consideration

Shares in the bidder being offered to target shareholders as consideration for their shares.

shareholder intention statements

A statement regarding the intention of a shareholder, which has been made or authorised by the shareholder, in the context of a bid, scheme or a shareholder vote for the purposes of item 7 of section 611.30

SIA or scheme implementation agreement

An agreement entered into between a bidder and target under which the target agrees to propose a scheme to its shareholders and containing the terms and conditions on which the bidder proposes to acquire the target.

shortfall facility

In the context of a rights issue, a facility which allows shareholders to subscribe for any shares not taken up by other shareholders under the rights issue.


A provision restricting a person from increasing a shareholding for a specified time.


A sub-underwriter takes some of the risk of the underwriter by contracting to take some (or all) of the shares the underwriter might have taken.  See underwriter.31

substantial holder

A shareholder who holds 5% or more in a company.  Substantial shareholdings must be disclosed.  See section 671B.

supplementary bidder’s statement

A supplementary statement to be prepared if a bidder becomes aware of:

  • a misleading or deceptive statement or omission from the bidder’s statement that is material from the point of view of a holder of bid class securities or
  • if a new circumstance has arisen since the bidder’s statement was lodged and would have been required by section 636 to be included in the bidder’s statement that is material from the point of view of a holder of bid class securities.

See section 643.

supplementary target’s statement

A supplementary statement to be prepared if a target becomes aware of:

  • a misleading or deceptive statement or omission from the target’s statement that is material from the point of view of a holder of bid class securities or
  • if a new circumstance has arisen since the target’s statement was lodged and would have been required by section 638 to be included in the target’s statement that is material from the point of view of a holder of bid class securities.

See section 644.


The efficiency gain created by bringing two or more companies or functions together.


The acquisition of a company (the target) by a person (the bidder) pursuant to a takeover bid.  See section 616.

takeover prohibition

The restriction in section 606 which prevents a person acquiring an interest in more than 20% of the shares in a widely held company without satisfying one of the exceptions in section 611, such as creep, takeover or scheme.


A person who ‘acquires’ an equity derivative, usually the client.32

target’s statement

A response to a bid prepared by the target. The statement must contain, among other things, all information that holders of bid class securities would reasonably require to make an informed assessment of whether to accept the offer under the bid.


The shareholding that a potential bidder has in a potential target prior to making an offer.

transfer scheme

The merger of managed investment schemes by the transfer to one (acquirer) of all the interests in the other (target).33

truth in takeovers

A general reference to the principle regarding false and misleading statements in takeover bids which provides that a company may not depart from particular statements made during the offer period.34

Example: If a bidder publicly states that it will not improve the consideration offered to: target shareholders and then later seeks to increase the consideration, it would be in breach of the 'last and final statements' policy and would risk regulatory action as a result, including a declaration of unacceptable circumstances.

upstream acquisition

Acquisition of shares in a company listed on the ASX, in a company which holds shares in an ASX listed company or which holds shares in a company which holds shares in an ASX listed company.

undervalue statement

A statement, or other representation, that says, or implies, that the value of an offer under a bid is less than the value of the securities in the target the subject of the offer.35


A person or company who guarantees funds will be raised by contracting, subject to conditions, to subscribe for shares not taken up by shareholders.36

white knight

An investor who acquires shares in a target company to help that company defend against a hostile bid.

window shop

A clause that states the target cannot actively solicit offers, but can consider unsolicited offers, give the potential offeror information and accept the offer if necessary to avoid a breach of fiduciary duty.


A person who ‘provides’ the equity derivative, usually an investment bank.37