Squeeze-Outs and Compulsory Acquisition
A squeeze-out lets a majority acquirer who already owns most of a company's shares force the remaining minority holders to sell, so the company can be taken fully private.
A squeeze-out (also called compulsory acquisition) is a legal mechanism letting an acquirer that has already bought a large enough majority of a company's shares — typically 90% under UK law, similar thresholds elsewhere — force the remaining minority shareholders to sell at the same price, whether they want to or not. Without it, a handful of holdouts could keep a company technically public and complicate the acquirer's ability to fully integrate, delist, or restructure it.
The flip side is a sell-out right: minority shareholders left over after a takeover crosses the threshold can, conversely, force the majority acquirer to buy them out on the same terms, so they aren't stuck holding stock in a now-illiquid, effectively private company.
Once an acquirer clears the statutory ownership threshold, remaining minority holders can be forced to sell at the same price everyone else got — this is what lets a takeover result in a fully private company rather than one with stray minority shareholders left behind.
Worked example
An acquirer launches a tender offer for a public company and 92% of shareholders accept, tendering their shares at $40 each. Because that clears the 90% compulsory-acquisition threshold, the acquirer can invoke a squeeze-out to force the remaining 8% of holders to sell at the same $40, completing a full takeover instead of leaving a small float of minority shareholders in an otherwise private company.
Related concepts
Further reading
- UK Companies Act 2006, s. 979 (Squeeze-Out)