TLDR:
A bear hug is an acquisition strategy where the acquirer makes a generous, unsolicited offer to buy a target company at a significant premium, putting the target’s board in a difficult position to reject without upsetting shareholders.
Bear Hug Mechanics and Tactics
A bear hug letter is a carefully choreographed opening move in a hostile acquisition campaign. The potential acquirer sends the letter to the target’s board (sometimes simultaneously making it public) announcing their acquisition interest and proposing an attractive premium — typically 20-35% above current market price. The letter is usually framed as a ‘friendly’ approach that the acquirer would prefer to negotiate, while implicitly threatening a hostile tender offer if the board doesn’t engage. The board is put in a difficult position: refusing to engage with a premium proposal subjects them to shareholder and legal pressure.