Public "bear hugs" are again becoming a prominent feature of UK public M&A.
Most public takeovers of UK companies are implemented by a bidder making a confidential approach to the target board, negotiating in private and, if successful, jointly announcing a proposed transaction recommended by the target board. But bidders that encounter resistance from target boards are increasingly choosing to make the proposed terms of their approach public, rather than continuing to negotiate behind closed doors. The tactic raises the stakes for both sides. A bidder that does so effectively subjects itself to a fixed timetable it does not control, but also seeks to use the target’s shareholders to generate sufficient pressure on the target’s board to agree and recommend a deal.
This alert examines the bear hug tactic, the regulatory framework it operates within, and why, in our view, bidders feel increasingly confident using the tactic.
The term “bear hug” cannot be found in the City Code on Takeovers and Mergers (the Code). It is the name given to a tactic where a bidder publicly announces a “possible offer” without the target board’s agreement. It is usually done after one or more private approaches have been rejected (it is not unusual for a target board to reject two or three possible offers from a bidder in deal negotiations). A bidder that cannot get a board to agree that its offer fairly values the target may instead take its case directly to the target’s shareholders.
The bidder will generally announce its indicative bid price (and the associated premium to the target’s unaffected share price), its strategic rationale for the transaction, and the target board’s responses to its approaches to date. It may also explain why the bidder disagrees with the target board’s valuation of the company or its assessment of the proposed transaction.
Though done without consent, a bear hug is not a hostile bid nor generally a precursor to one. The bidder is not announcing a firm intention to make an offer under Rule 2.7 of the Code - only a possible offer. The immediate goal is usually to secure target board engagement and ultimately a recommendation of the bidder’s offer; not to proceed directly with an unrecommended offer.
A “bear hug” is also not just a strategic leak. The FCA has warned that deliberately passing inside information to the press during live M&A may amount to unlawful disclosure. Implementing a “bear hug” requires a properly prepared announcement and communications plan that complies with the Code.
The “bear hug” cannot compel the board to negotiate or recommend an offer, but shareholder scrutiny of the possible offer may make it more difficult for the board simply to refuse to engage. The bidder sacrifices confidentiality and timetable flexibility, and its public case must generate pressure without making a later recommended transaction harder to achieve.
The UK Takeover Panel (the Panel) has long been concerned about the disruptive potential of prolonged public bid speculation. The current principal protection is the 28 day “Put Up or Shut Up” (PUSU) deadline.
Before reforms to the Code in 2011, the Panel would normally impose a deadline on a bidder to make a firm offer if the target board asked it to do so. This left targets to decide whether to seek protection whilst already under siege.
In its review following the 2010 Kraft/Cadbury takeover, the Panel concluded that targets required greater protection from prolonged periods of uncertainty caused by public but unconfirmed interest in making an offer and it reformed the Code accordingly. Rule 2.6 of the Code now provides that, once a potential bidder has been publicly identified, it must normally announce a firm intention to make an offer under Rule 2.7 or announce that it does not intend to make an offer under Rule 2.8, by 5.00 p.m. on the 28th day after the announcement in which it was first identified.
The bidder cannot obtain an extension unilaterally—any extension request of the Panel must normally come from, or be consented to by, the target board. This gives the target a degree of control over the timetable.
A bidder that announces that it does not intend to make an offer will generally be restricted from returning for six months.
The Code does not, and was not intended to, stop a “bear hug”. It prevents it from continuing indefinitely. Twenty-eight days still provides meaningful time for the bidder to make its case to shareholders and crystallise a deal. If that process causes the target board to engage, the board can ask the Panel for more time to reach agreement.
*Most transactions still follow the traditional confidential course. What has changed, however, is the willingness of some bidders to go public when that course does not produce agreement. Several structural features of the current UK capital markets appear to be supporting such willingness.
Persistent valuation discount. Many UK-listed companies have traded at a sustained discount to international peers. A target board may consider that the market price does not reflect the target’s prospects and may judge an offer against the value it expects the company to produce over several years. Shareholders may prefer the certainty of a premium available now.
Changing shareholder composition impacting views. Domestic pension funds, insurers and similar long-term institutions now account for a smaller share of many UK shareholder registers. Overseas investors, activists and event-driven funds may have different time horizons and may place different weight on price, timing and execution risk.
A greater willingness to challenge boards. Shareholders are increasingly prepared to state publicly that a board should engage with a bidder. That does not mean they will support any offer at a premium. It does mean that a bidder with credible terms may have an audience for the argument that the board should at least open discussions.
Recent examples suggest to bidders the tactic works. Prologis made a series of public proposals for SEGRO and challenged the assumptions underpinning SEGRO’s assessment of value. On 22 July 2026, after Prologis made its fourth proposal, SEGRO announced that its board would be minded to recommend the financial terms if Prologis made a firm offer on those terms, subject to confirmatory due diligence and agreement on the remaining terms and documentation. SEGRO then requested an extension of Prologis’s Rule 2.6 deadline to 12 August 2026. Zurich’s approach to Beazley provides a further example. Beazley rejected Zurich’s initial public proposal, but the parties later agreed a recommended offer announced on 2 March 2026. Public pressure helped bring the parties back to the negotiating table.
Going public is not without cost: it may harden the target board’s position, attract competing interest and leave the bidder having to withdraw if it cannot proceed.
The increasing use of the “bear hug” nevertheless suggests that, in current market conditions, more bidders believe that the opportunity to move a reluctant board towards engagement justifies the risks, including the PUSU deadline, of making the proposal public.
Once the possible offer is made public, the bidder’s freedom over price, communications and timing is materially reduced. In addition to the requirements of Rule 2.6, Rule 2.7 and Rule 2.8 set out above, the following provisions of the Code will regulate both the bidder and the target.
Statements about price and other terms. Under Rule 2.5, the Panel must be consulted before a statement is made about the terms on which an offer might be made. If a potential bidder states a price or exchange ratio, any subsequent offer must normally be made on the same or better terms. A statement that the terms are “final”, “best and final” or will not be increased can prevent the bidder from improving them. Any intended reservations therefore need to be included clearly in the announcement.
Communications with shareholders. The bidder cannot treat the ensuing shareholder campaign that results from the “bear hug” as ordinary investor relations. The Code regulates the information and opinions provided to shareholders, analysts and the media. Material new information or a significant new opinion must generally be announced, and presentations and other written materials may need to be published. Meetings with shareholders are also subject to specific requirements. The bidder’s announcement, presentation materials and oral messages therefore need to be prepared and checked together.
Readiness to announce a firm offer. If the target board does not request an extension, the bidder must be ready within 28 days either to proceed or to withdraw. A Rule 2.7 announcement is a firm commitment. The bidder must have every reason to believe that it can implement the offer, announce its terms, conditions and intentions and, for a cash offer, obtain the required cash confirmation. Financing, regulatory analysis, offer structure and the bidder’s position on diligence should therefore be substantially developed before it goes public.
The target board’s position. A “bear hug” does not oblige the target board to negotiate, provide due diligence materials or request an extension. The board may take account not only of price, but also the form and certainty of the consideration, regulatory risk, the bidder’s plans for the business and the value and risks of the company’s standalone strategy. It should, however, expect its decision and reasoning to be tested by shareholders.
The board’s discretion is also subject to the Code. Rule 21.1 restricts the board from taking action that may frustrate an offer or bona fide possible offer unless shareholders approve the action or the Panel consents. The board is entitled to reject a proposal, not to frustrate it.
Information provided to competing bidders. If the target gives information to one bidder or potential bidder, Rule 21.3 may require it, on request, to provide the same information promptly to another offeror or bona fide potential offeror. A bidder that uses a “bear hug” to secure engagement may therefore find that a competing bidder is entitled to the benefit of the resulting due diligence process.
The return of the “bear hug” should not be mistaken for a broader return of hostile takeovers. Most bidders still need the target’s cooperation: a scheme of arrangement cannot be pursued without it, and regulatory approvals may be harder to secure without target assistance. A bear hug is therefore usually an attempt to force a return to negotiations, rather than to bypass the board. While UK valuations remain under pressure and boards and shareholders may reasonably take different views of value, bidders are likely to continue using the tactic where they believe the target’s shareholders will support engagement.
For bidders, public escalation should therefore come only after the financing, regulatory analysis and shareholder case are sufficiently developed. For targets, preparing for shareholder engagement should not wait until an approach becomes public.
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