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What happens to my shares if my company is taken over?Easy

You are paid out, in cash or in the buyer's shares, on a date months after the announcement — and until then you own something that tracks a deal rather than a business.

3 min read · 515 words

Somebody has agreed to buy the company whose shares you hold. Here is what actually happens to the shares in your account, in the order it happens.

First: the price jumps, and then stops moving much

On the announcement the shares move close to the offer price and then largely stop tracking the business. From that day they track one question instead: will this deal complete.

They usually settle a little below the offer. That gap is not a discount and not an opinion that the company is worth less. It is the market pricing two things: the chance that something stops the deal, and the fact that your money is tied up until it closes.

Then: months pass, and nothing appears to happen

Between announcement and completion there are approvals to obtain, a document to publish and usually a shareholder vote. Six to twelve months is ordinary. During that time the only real news is regulatory: a filing, a clearance, an extension.

You get paid in one of three ways

  • Cash. A fixed amount per share. What you receive is known from day one, and in most countries receiving it is a disposal for tax — which is worth checking before you decide anything.
  • Shares in the buyer. You receive a fixed number of the buyer's shares for each of yours. What that is worth moves every day with the buyer's price, so a "30% premium" announced in January can be much less by the time it completes. See the exchange ratio.
  • A mixture, sometimes with a choice, sometimes with the choice subject to a limit that scales everybody back.

Do you have to accept?

It depends on the structure, and this is the part most people are surprised by.

  • In a scheme of arrangement, a court-approved process common in the UK and elsewhere, a vote by the required majorities binds everybody. If it passes, your shares are transferred whether you voted for it or not.
  • In a tender offer you accept individually. But once the buyer holds enough — a statutory threshold, commonly around nine tenths — it can squeeze out the rest compulsorily at the same price.

So holding out is rarely a way to keep the shares. It is usually a way to be paid the same amount later.

What if you do nothing at all?

In a scheme, nothing is required of you: the consideration arrives after completion. In a tender offer, not responding can mean you are still holding when the shares are delisted, and then you are waiting for the squeeze-out. Neither is a disaster, but the second is slower and more annoying.

The one thing worth watching

If you are being paid in shares, watch the buyer's share price, not the announced premium. Nothing in the agreement moves when it falls — the ratio was fixed — so the value of what you are receiving falls with it. A collar limits that, and whether the deal has one is in the announcement.

The recommended offer sets out the conditions and the timetable in full.