VC & PE Glossary
What Is Mandatory Offer?
Updated
Definition
A mandatory offer is a legal requirement—common in some European jurisdictions—that an acquirer who crosses a ownership threshold must bid for remaining shares on regulated terms.
Useful for: Founders, Investors
Mandatory offer is a regulatory obligation requiring an acquirer who reaches a specified ownership level to make a public offer to purchase remaining shares under prescribed pricing and process rules.
How it works
Takeover regimes— notably in the UK, EU member states, and other markets—define control thresholds (often 30% voting rights). Crossing the threshold via purchase or concert-party action triggers a mandatory bid for all outstanding shares unless exemptions apply.
Offer price floors typically reference recent trading prices or prior deal prices—protecting minorities from a control premium captured only by sellers who negotiated the block sale. Timelines, disclosure, and regulator approval govern the process.
US private company venture financings generally operate under contractual drag-along and charter terms instead of statutory mandatory offers. The concept surfaces when:
- A VC-backed startup is acquired by a European listed company
- Shareholders hold securities in foreign listed entities
- Take-private transactions touch multi-jurisdiction cap tables
Why it matters
- Founders: Your earnout or rollover in a cross-border deal may interact with mandatory offer timing—legal counsel coordinates closing sequences.
- Investors: Acquirers modeling control stakes must include full float purchase costs, not just negotiated blocks.
Common mistake
Assuming a negotiated 51% purchase avoids buying minorities. In regulated markets, mandatory offer law may require a broader bid regardless of private deal terms.
Related ideas
See also tender offer, change of control, drag-along, and merger.
Related terms
- Change of Control — Change of control is a transaction or event that shifts majority voting power or ownership of a company — such as a merger, acquisition, or sale of most assets — often triggering contractual rights for investors and employees.
- Tender Offer — A tender offer is a structured program where a company or approved buyer purchases shares from existing shareholders — often employees and early investors — at a set price during a limited window.
Common questions
Short answers for founders, LPs, and operators