Mandatory Tender Clause

Summary

This Mandatory Tender clause requires a buyer who purchases more than a specified percentage of an issuer's shares to purchase all other outstanding issuer shares on the same terms as the initial purchase. This clause may be included in a securityholder agreement. Buyers usually are willing to purchase a majority stake at a higher price per share than a minority stake because a majority stake confers the ability to control the issuer. Without a mandatory tender provision, the buyer could use its control position to buy out the minority's shares at a lower price per share than it paid in the transaction in which it acquired control. For a comprehensive list of practice notes, templates, and clauses, see Stockholders' Agreement Resource Kit and M&A Provisions Resource Kit. For further discussion about minority securityholder rights protections, see Minority Securityholder Rights Protections.