Introduction: Market Undervaluation as a Basis for Mandatory Tender Offers
The prolonged undervaluation of a significant number of Russian public companies has currently created a unique window of opportunity for investors. Low share prices make large-scale buyouts economically feasible in order to gain control of assets whose fundamental value is significantly higher than the current market value.
An investor who has acquired 30, 50, or 75% of a company's shares is legally obligated to make a mandatory tender offer (MTO) to all remaining shareholders. In established English-language terminology, a mandatory tender offer is also called a mandatory tender offer (MTO).
An MTO creates an opportunity for minority shareholders to exit their shareholdings by selling them at the price established before the MTO was announced.
If, as a result of the MTO, an investor consolidates more than 95% of the company's shares, the law grants them the right to a mandatory buyout of the remaining shares (squeeze-out).
Thus, the combination of persistent undervaluation of public companies and the growing number of transactions to consolidate corporate control brings the institution of MTO to the forefront of corporate practices.
Mandatory Tender Offer Mechanism under Russian Law
General Provisions
A mandatory tender offer to acquire shares of a public joint-stock company (PJSC) must be sent to its shareholders by a person who, either individually or jointly with their affiliates, has exceeded the ownership threshold of more than 30% (50%, 75%) of the PJSC's voting shares.
As part of a mandatory tender offer, the law provides the following guarantees for minority shareholder rights.
Guarantee No. 1. Fair Price: As a general rule, the price offered in such a mandatory tender offer cannot be lower than the weighted average price of the shares, determined based on the results of organized trading for the six months preceding the date of the mandatory tender offer. If the PJSC's shares are not traded on a stock exchange, the selling price cannot be lower than the market price of such shares, as determined by an independent appraiser.
Guarantee No. 2. Equal Terms: The offer must be addressed to all holders of the relevant securities under the same conditions.
Guarantee No. 3. Regulatory oversight: The MTO is subject to approval by the Bank of Russia, which verifies its compliance with the law.
Guarantee No. 4. Limitation on voting on shares below the threshold: until the obligation to submit the MTO is fulfilled, a person who has exceeded the threshold is not entitled to vote on shares exceeding the relevant threshold (30%, 50%, 75%).
Thus, the MTO mechanism is considered a tool for protecting minority shareholders, as it is aimed at providing them with the opportunity to exit the company during a change of control under fair terms. However, in practice, the effectiveness of this mechanism may be limited for various reasons.
Shareholder consolidation, voluntary and mandatory tender offers
In Russian practice, investors typically purchase shares through non-public over-the-counter transactions or anonymous orders in the order book before reaching the MTO threshold.
Russian regulation allows investors to make a voluntary public tender offer to buy back shares before reaching the MTO threshold. However, in Russian practice, this instrument is used extremely rarely.
At the same time, non-public shareholding consolidation transactions can in some cases create risks of insider information violations and market manipulation. A voluntary offer or a public offer executed without complying with voluntary offer rules can help avoid such risks.
A Comparative Analysis of Change of Control Regulation in the US, EU, and Russia
A comparative approach to protecting minority shareholders during a change of control in different jurisdictions reveals two fundamentally different regulatory philosophies:
The Russian model, while formally close to the European model, has significant practical differences related to the specifics of legislation, the work of regulators, and judicial practice.
The European Union: Mandatory Proposal and Governance Neutrality
The EU is governed by the Takeover Directive (2004/25/EC) (hereinafter referred to as the Directive), which serves as a framework document and establishes minimum standards. The legal basis for individual EU countries is the regulations of those countries, which have implemented the Directive's provisions into their own legislation.
The provisions of the Directive were largely influenced by the "City Code on Takeovers and Mergers," which applies in the UK and is independent of EU law after Brexit.
The key condition triggering the MTO mechanism is the acquisition of control over the company, which in most EU member states is formalized as a threshold of 30% of voting shares. However, EU member states have the right to set a lower or higher threshold than 30% of voting shares.
Anyone who gains control is required to make a mandatory offer to acquire the securities from all remaining shareholders.
An important protective mechanism is the principle of non-intervention or neutrality of the company's board of directors. This principle is expressed in the fact that after a takeover is announced, the company's management cannot take actions aimed at opposing the transaction (such as poison pills or major transactions that change the asset structure) without the approval of the general meeting of shareholders. This provision protects the entity initiating the MTO from management discretion, allowing shareholders to independently decide whether to sell their shares.
United States: Disclosure and Tender Offers Instead of Mandatory Offers
In the United States, there is no federal law requiring an acquirer who has gained control of a company to repurchase the shares of the remaining shareholders.
The primary legal framework for takeovers, including the board's authority to use "poison pills," is determined by state corporate law, which may have its own specific characteristics (for example, the Delaware General Corporation Law and the case law of Delaware courts).
Meanwhile, in the United States, there is no direct equivalent to a mandatory offer, similar to the European or Russian model.
The standard method for acquiring control is a voluntary, but strictly regulated, tender offer to all shareholders. The primary trigger for a tender offer is the intention to acquire a significant stake.
The legal framework in this case is the Williams Act (1968) and the rules of the Securities and Exchange Commission (SEC). The key regulatory provisions are disclosure requirements and fair procedures for tender offers, not the requirement to make an offer upon reaching a certain ownership threshold.
The Williams Act is a federal law that governs tender offers, not mandatory tender offers. As noted above, a tender offer is a voluntary offer to purchase shares made directly to all shareholders. The Williams Act establishes rules for such offers to ensure transparency and fair treatment for all shareholders, establishing:
Any person who acquires more than 5% of the shares is required to disclose information about themselves, their sources of funds, and their intentions by filing the relevant disclosures with the SEC.
Unlike in the EU, boards of directors can actively use protective mechanisms, such as "poison pills," acting within the scope of their fiduciary duties to maximize the benefit for all shareholders. Such actions are governed by state corporate law, particularly Delaware, and court practice.
Russian Regulation: A Hybrid Model with Weakened Safeguards
Russian regulation, while formally adopting the European 30% threshold, does not incorporate the key systemic elements of either model.
The rule of triggering the MTO upon reaching 30% does not always reflect Russian reality, where a significantly larger stake is often required for effective control.
A distinctive feature of Russian corporate practice, unlike approaches common in the EU, is the closer connection between management bodies and the interests of majority shareholders. In practice, this can create situations where the implementation of the MTO procedure faces certain difficulties. This circumstance, in turn, can create risks for minority shareholders in exercising their right to exit the company at a fair price, which is determined through the MTO process.
Unlike the US, where acquisitions through tender offers are standard practice, such a mechanism is underdeveloped in Russia, and the MTO obligation is often perceived as a burden rather than an integral part of fair corporate conduct towards minority investors.
The current Russian model has fallen into an institutional trap: it fails to provide adequate protection for minority shareholders, as in the EU, due to the lack of management neutrality, and it fails to create a flexible and transparent market for takeovers, as in the US. This underscores the need for a profound, rather than cosmetic, reform, with a clear choice between two proven international models, but taking into account Russian conditions and the realities of corporate life.
Proposals for Reforming the Mandatory Bid Institution
Bill No. 519694-8 of December 25, 2023
In 2023, the Government submitted Bill No. 519694-8 to the State Duma, aimed at reforming the mandatory bid institution. It proposes, among other things, the following changes:
It is proposed to revise the rules for counting votes before submitting the MTO to prevent a violator from maintaining control, and to introduce the right of minority shareholders to demand the repurchase of their shares at a fair price from a party that has failed to submit the MTO.
It is proposed to establish clear rules for exemption from the obligation to submit the MTO (for example, if the stake falls below the threshold within the specified period), which is consistent with established judicial practice and the regulatory approach in EU countries.
The demand buyout price may be unfair. The bill's authors see the current regulation as ripe for abuse.
It is proposed to explicitly prohibit the inclusion of shares acquired from related parties for the purposes of determining the squeeze-out threshold.
While this bill contains interesting proposals, like previous initiatives that were never implemented in law, it has a number of inconsistencies that have already been highlighted by scholars and have led to conflicting case law, a clear indication of the need for reform.
In particular, this concerns the proposal to grant shareholders the right to demand the repurchase of their shares at a fair price from a party that has failed to submit the MTO.
It has been repeatedly noted in legal literature that shareholders' ability to file lawsuits demanding the repurchase of their shares in the event of failure to submit the MTO is blocked by judicial practice.
At the same time, we agree with the opinion of certain expert authors that, to protect minority shareholders, it is insufficient to grant them the right to demand the redemption of their shares only in the event of a person's failure to submit a material and financial transaction. Proposals have also been made regarding the need for:
The Bank of Russia's MTO Reform Initiative
In November 2025, the Bank of Russia also outlined its plans to improve MTO regulation, which are aimed, in particular, at:
"- defining share ownership thresholds that trigger the obligation to issue a mandatory tender offer (so that this takes into account the acquisition of effective control over a company, which, given the specifics of the Russian market, often requires the acquisition of a larger block of shares than stipulated by current regulations);
- increasing the minimum number of shares required to acquire the right to a mandatory buyout, in accordance with a mandatory or voluntary tender offer, given that this will better guarantee a fair buyout price.
At the same time, it is proposed to expand the Bank of Russia's powers, including with regard to review deadlines and oversight of mandatory tender offer and mandatory buyout procedures, in order to ensure a comprehensive review of the legality of these corporate actions."
In defining new minimum share ownership thresholds, the Bank of Russia is clearly taking into account the criticism that has been leveled against nearly every recent bill to reform the MTO system.
It will be interesting to see the Bank of Russia's more detailed proposals in this regard: will they provide for the possibility of rebutting the presumption of control in discussions with the regulator; will the grounds for not issuing a mandatory tender offer be expanded, similar to European regulations; and so on.
Changes in Bank of Russia Practice
Although regulatory changes have not yet been made, investors preparing for the MTO should take into account recent changes in the Bank of Russia's practices.
Inside Information and Market Manipulation. The Bank of Russia has recently stated that, despite restrictive legislative language, it will adhere to a substantive, rather than a formal, approach to insider information and market manipulation. Specifically, the Bank of Russia has emphasized that insider information includes not only information about the MTO, but also information about preparations for it. This may mean that asset consolidation transactions prior to the MTO may be conducted using insider information. We are also seeing an expansion of the regulator's tools for monitoring non-standard transactions and market manipulation.
Instructions. The regulator is increasingly using instructions to market participants both to obtain information about ongoing and upcoming transactions and to eliminate violations of the law. The Bank of Russia's powers to issue orders are defined very broadly, allowing the regulator to use this instrument flexibly and quickly.
Economic feasibility and integrity. Overall, the Bank of Russia is gradually moving toward regulation based on principles rather than rules. We increasingly see that the regulator, in its practice, is not limiting itself to citing casuistic legal provisions, but is appealing to economic feasibility, integrity, and other evaluative criteria.
We welcome the evolution of the Bank of Russia's approaches: following the best practices of its international counterparts, the mega-regulator is stretching its shoulders to the full extent of its authority.
Opportunities for Investors in the Current Situation
The current context of historical undervaluation of many Russian assets ("low multiples") creates an unusual investment environment.
A phenomenon well-known and observed in global markets may manifest itself here: during periods of recession and high volatility, acquisitions intensify. This is no coincidence.
Declining market prices make companies accessible targets for strategic investors with capital. Buyout offers should increase during such periods, as they allow businesses to be acquired at prices significantly below their pre-crisis valuation, while also being below their intrinsic value.
This logic directly applies to the current Russian reality.
Market undervaluation opens a unique window of opportunity for majority shareholders and external strategists to consolidate assets. Launching MTOs becomes not a burden, but a rational tool for realizing such intentions. However, in Russian practice, the mandatory tender offer (MTO) rarely occurs, leading to an increase in the cost of the bank guarantee required for the transaction.
Formally, the MTO is initiated when a regulatory threshold is exceeded, not by market conditions, which are the key catalyst for the decision to increase the stake.
Consequently, despite the associated costs of buying out minority shareholders, the overall price of establishing control often proves economically justified and attractive. Buyers with access to resources exploit market instability to pursue strategic acquisitions that might otherwise be too expensive or contested.
Paradoxically, this same situation creates an extraordinary opportunity for minority shareholders. A mandatory tender offer (MTO) provides them with a clear and legally protected mechanism for exiting their shares at a price that typically exceeds current market prices.
For a minority shareholder, selling at the MTO price during a bear market is often the optimal outcome, allowing them to secure a return that would otherwise be unattainable in the foreseeable future.
This effect is amplified during periods when a company's shares may be fundamentally undervalued – this is when a buyout at a fair price, guaranteed by MTO legislation, becomes most valuable.
Therefore, the current market phase, contrary to the general logic of declining M&A activity, is creating a window of opportunity for two key groups: those seeking asset consolidation and those seeking the optimal exit point.
Conclusion
Despite its shortcomings and ongoing debate about reform, the mandatory bid mechanism is becoming a key mechanism in the current market conditions for redistributing corporate control. It serves as a bridge between fundamental asset undervaluation and fair compensation for minority shareholders, stimulating ownership consolidation and market recovery. Further development of this institution, taking into account both international experience (primarily the American tender offer model) and Russian specifics, will be critical for maintaining a balance of interests between majority and minority shareholders, and the needs of the economy as a whole.
The prolonged undervaluation of a significant number of Russian public companies has currently created a unique window of opportunity for investors. Low share prices make large-scale buyouts economically feasible in order to gain control of assets whose fundamental value is significantly higher than the current market value.
An investor who has acquired 30, 50, or 75% of a company's shares is legally obligated to make a mandatory tender offer (MTO) to all remaining shareholders. In established English-language terminology, a mandatory tender offer is also called a mandatory tender offer (MTO).
An MTO creates an opportunity for minority shareholders to exit their shareholdings by selling them at the price established before the MTO was announced.
If, as a result of the MTO, an investor consolidates more than 95% of the company's shares, the law grants them the right to a mandatory buyout of the remaining shares (squeeze-out).
Thus, the combination of persistent undervaluation of public companies and the growing number of transactions to consolidate corporate control brings the institution of MTO to the forefront of corporate practices.
Mandatory Tender Offer Mechanism under Russian Law
General Provisions
A mandatory tender offer to acquire shares of a public joint-stock company (PJSC) must be sent to its shareholders by a person who, either individually or jointly with their affiliates, has exceeded the ownership threshold of more than 30% (50%, 75%) of the PJSC's voting shares.
As part of a mandatory tender offer, the law provides the following guarantees for minority shareholder rights.
Guarantee No. 1. Fair Price: As a general rule, the price offered in such a mandatory tender offer cannot be lower than the weighted average price of the shares, determined based on the results of organized trading for the six months preceding the date of the mandatory tender offer. If the PJSC's shares are not traded on a stock exchange, the selling price cannot be lower than the market price of such shares, as determined by an independent appraiser.
Guarantee No. 2. Equal Terms: The offer must be addressed to all holders of the relevant securities under the same conditions.
Guarantee No. 3. Regulatory oversight: The MTO is subject to approval by the Bank of Russia, which verifies its compliance with the law.
Guarantee No. 4. Limitation on voting on shares below the threshold: until the obligation to submit the MTO is fulfilled, a person who has exceeded the threshold is not entitled to vote on shares exceeding the relevant threshold (30%, 50%, 75%).
Thus, the MTO mechanism is considered a tool for protecting minority shareholders, as it is aimed at providing them with the opportunity to exit the company during a change of control under fair terms. However, in practice, the effectiveness of this mechanism may be limited for various reasons.
Shareholder consolidation, voluntary and mandatory tender offers
In Russian practice, investors typically purchase shares through non-public over-the-counter transactions or anonymous orders in the order book before reaching the MTO threshold.
Russian regulation allows investors to make a voluntary public tender offer to buy back shares before reaching the MTO threshold. However, in Russian practice, this instrument is used extremely rarely.
At the same time, non-public shareholding consolidation transactions can in some cases create risks of insider information violations and market manipulation. A voluntary offer or a public offer executed without complying with voluntary offer rules can help avoid such risks.
A Comparative Analysis of Change of Control Regulation in the US, EU, and Russia
A comparative approach to protecting minority shareholders during a change of control in different jurisdictions reveals two fundamentally different regulatory philosophies:
- the European model, based on mandatory rules, and
- the American model, built on the principles of information disclosure and competition.
The Russian model, while formally close to the European model, has significant practical differences related to the specifics of legislation, the work of regulators, and judicial practice.
The European Union: Mandatory Proposal and Governance Neutrality
The EU is governed by the Takeover Directive (2004/25/EC) (hereinafter referred to as the Directive), which serves as a framework document and establishes minimum standards. The legal basis for individual EU countries is the regulations of those countries, which have implemented the Directive's provisions into their own legislation.
The provisions of the Directive were largely influenced by the "City Code on Takeovers and Mergers," which applies in the UK and is independent of EU law after Brexit.
The key condition triggering the MTO mechanism is the acquisition of control over the company, which in most EU member states is formalized as a threshold of 30% of voting shares. However, EU member states have the right to set a lower or higher threshold than 30% of voting shares.
Anyone who gains control is required to make a mandatory offer to acquire the securities from all remaining shareholders.
An important protective mechanism is the principle of non-intervention or neutrality of the company's board of directors. This principle is expressed in the fact that after a takeover is announced, the company's management cannot take actions aimed at opposing the transaction (such as poison pills or major transactions that change the asset structure) without the approval of the general meeting of shareholders. This provision protects the entity initiating the MTO from management discretion, allowing shareholders to independently decide whether to sell their shares.
United States: Disclosure and Tender Offers Instead of Mandatory Offers
In the United States, there is no federal law requiring an acquirer who has gained control of a company to repurchase the shares of the remaining shareholders.
The primary legal framework for takeovers, including the board's authority to use "poison pills," is determined by state corporate law, which may have its own specific characteristics (for example, the Delaware General Corporation Law and the case law of Delaware courts).
Meanwhile, in the United States, there is no direct equivalent to a mandatory offer, similar to the European or Russian model.
The standard method for acquiring control is a voluntary, but strictly regulated, tender offer to all shareholders. The primary trigger for a tender offer is the intention to acquire a significant stake.
The legal framework in this case is the Williams Act (1968) and the rules of the Securities and Exchange Commission (SEC). The key regulatory provisions are disclosure requirements and fair procedures for tender offers, not the requirement to make an offer upon reaching a certain ownership threshold.
The Williams Act is a federal law that governs tender offers, not mandatory tender offers. As noted above, a tender offer is a voluntary offer to purchase shares made directly to all shareholders. The Williams Act establishes rules for such offers to ensure transparency and fair treatment for all shareholders, establishing:
- a level playing field for all shareholders;
- the right to refuse to sell shares during the offer period;
- a best-price rule if the price increases during the offer.
Any person who acquires more than 5% of the shares is required to disclose information about themselves, their sources of funds, and their intentions by filing the relevant disclosures with the SEC.
Unlike in the EU, boards of directors can actively use protective mechanisms, such as "poison pills," acting within the scope of their fiduciary duties to maximize the benefit for all shareholders. Such actions are governed by state corporate law, particularly Delaware, and court practice.
Russian Regulation: A Hybrid Model with Weakened Safeguards
Russian regulation, while formally adopting the European 30% threshold, does not incorporate the key systemic elements of either model.
The rule of triggering the MTO upon reaching 30% does not always reflect Russian reality, where a significantly larger stake is often required for effective control.
A distinctive feature of Russian corporate practice, unlike approaches common in the EU, is the closer connection between management bodies and the interests of majority shareholders. In practice, this can create situations where the implementation of the MTO procedure faces certain difficulties. This circumstance, in turn, can create risks for minority shareholders in exercising their right to exit the company at a fair price, which is determined through the MTO process.
Unlike the US, where acquisitions through tender offers are standard practice, such a mechanism is underdeveloped in Russia, and the MTO obligation is often perceived as a burden rather than an integral part of fair corporate conduct towards minority investors.
The current Russian model has fallen into an institutional trap: it fails to provide adequate protection for minority shareholders, as in the EU, due to the lack of management neutrality, and it fails to create a flexible and transparent market for takeovers, as in the US. This underscores the need for a profound, rather than cosmetic, reform, with a clear choice between two proven international models, but taking into account Russian conditions and the realities of corporate life.
Proposals for Reforming the Mandatory Bid Institution
Bill No. 519694-8 of December 25, 2023
In 2023, the Government submitted Bill No. 519694-8 to the State Duma, aimed at reforming the mandatory bid institution. It proposes, among other things, the following changes:
- Replacing the concept of "affiliates" with "related persons"
- Alignment with antitrust and banking regulations
- Strengthening enforcement mechanisms for compliance with MTO obligations and revising sanctions
It is proposed to revise the rules for counting votes before submitting the MTO to prevent a violator from maintaining control, and to introduce the right of minority shareholders to demand the repurchase of their shares at a fair price from a party that has failed to submit the MTO.
- Resolving the situation of "unplanned" exceeding the control threshold
It is proposed to establish clear rules for exemption from the obligation to submit the MTO (for example, if the stake falls below the threshold within the specified period), which is consistent with established judicial practice and the regulatory approach in EU countries.
- Protection from Abuse during Compulsory Squeeze-Outs
The demand buyout price may be unfair. The bill's authors see the current regulation as ripe for abuse.
It is proposed to explicitly prohibit the inclusion of shares acquired from related parties for the purposes of determining the squeeze-out threshold.
While this bill contains interesting proposals, like previous initiatives that were never implemented in law, it has a number of inconsistencies that have already been highlighted by scholars and have led to conflicting case law, a clear indication of the need for reform.
In particular, this concerns the proposal to grant shareholders the right to demand the repurchase of their shares at a fair price from a party that has failed to submit the MTO.
It has been repeatedly noted in legal literature that shareholders' ability to file lawsuits demanding the repurchase of their shares in the event of failure to submit the MTO is blocked by judicial practice.
At the same time, we agree with the opinion of certain expert authors that, to protect minority shareholders, it is insufficient to grant them the right to demand the redemption of their shares only in the event of a person's failure to submit a material and financial transaction. Proposals have also been made regarding the need for:
- Provide such a right if the buyout price is understated and the shareholder disagrees with it.
- Establish a mechanism for mandatory (compulsory) joining a class action lawsuit.
The Bank of Russia's MTO Reform Initiative
In November 2025, the Bank of Russia also outlined its plans to improve MTO regulation, which are aimed, in particular, at:
"- defining share ownership thresholds that trigger the obligation to issue a mandatory tender offer (so that this takes into account the acquisition of effective control over a company, which, given the specifics of the Russian market, often requires the acquisition of a larger block of shares than stipulated by current regulations);
- increasing the minimum number of shares required to acquire the right to a mandatory buyout, in accordance with a mandatory or voluntary tender offer, given that this will better guarantee a fair buyout price.
At the same time, it is proposed to expand the Bank of Russia's powers, including with regard to review deadlines and oversight of mandatory tender offer and mandatory buyout procedures, in order to ensure a comprehensive review of the legality of these corporate actions."
In defining new minimum share ownership thresholds, the Bank of Russia is clearly taking into account the criticism that has been leveled against nearly every recent bill to reform the MTO system.
It will be interesting to see the Bank of Russia's more detailed proposals in this regard: will they provide for the possibility of rebutting the presumption of control in discussions with the regulator; will the grounds for not issuing a mandatory tender offer be expanded, similar to European regulations; and so on.
Changes in Bank of Russia Practice
Although regulatory changes have not yet been made, investors preparing for the MTO should take into account recent changes in the Bank of Russia's practices.
Inside Information and Market Manipulation. The Bank of Russia has recently stated that, despite restrictive legislative language, it will adhere to a substantive, rather than a formal, approach to insider information and market manipulation. Specifically, the Bank of Russia has emphasized that insider information includes not only information about the MTO, but also information about preparations for it. This may mean that asset consolidation transactions prior to the MTO may be conducted using insider information. We are also seeing an expansion of the regulator's tools for monitoring non-standard transactions and market manipulation.
Instructions. The regulator is increasingly using instructions to market participants both to obtain information about ongoing and upcoming transactions and to eliminate violations of the law. The Bank of Russia's powers to issue orders are defined very broadly, allowing the regulator to use this instrument flexibly and quickly.
Economic feasibility and integrity. Overall, the Bank of Russia is gradually moving toward regulation based on principles rather than rules. We increasingly see that the regulator, in its practice, is not limiting itself to citing casuistic legal provisions, but is appealing to economic feasibility, integrity, and other evaluative criteria.
We welcome the evolution of the Bank of Russia's approaches: following the best practices of its international counterparts, the mega-regulator is stretching its shoulders to the full extent of its authority.
Opportunities for Investors in the Current Situation
The current context of historical undervaluation of many Russian assets ("low multiples") creates an unusual investment environment.
A phenomenon well-known and observed in global markets may manifest itself here: during periods of recession and high volatility, acquisitions intensify. This is no coincidence.
Declining market prices make companies accessible targets for strategic investors with capital. Buyout offers should increase during such periods, as they allow businesses to be acquired at prices significantly below their pre-crisis valuation, while also being below their intrinsic value.
This logic directly applies to the current Russian reality.
Market undervaluation opens a unique window of opportunity for majority shareholders and external strategists to consolidate assets. Launching MTOs becomes not a burden, but a rational tool for realizing such intentions. However, in Russian practice, the mandatory tender offer (MTO) rarely occurs, leading to an increase in the cost of the bank guarantee required for the transaction.
Formally, the MTO is initiated when a regulatory threshold is exceeded, not by market conditions, which are the key catalyst for the decision to increase the stake.
Consequently, despite the associated costs of buying out minority shareholders, the overall price of establishing control often proves economically justified and attractive. Buyers with access to resources exploit market instability to pursue strategic acquisitions that might otherwise be too expensive or contested.
Paradoxically, this same situation creates an extraordinary opportunity for minority shareholders. A mandatory tender offer (MTO) provides them with a clear and legally protected mechanism for exiting their shares at a price that typically exceeds current market prices.
For a minority shareholder, selling at the MTO price during a bear market is often the optimal outcome, allowing them to secure a return that would otherwise be unattainable in the foreseeable future.
This effect is amplified during periods when a company's shares may be fundamentally undervalued – this is when a buyout at a fair price, guaranteed by MTO legislation, becomes most valuable.
Therefore, the current market phase, contrary to the general logic of declining M&A activity, is creating a window of opportunity for two key groups: those seeking asset consolidation and those seeking the optimal exit point.
Conclusion
Despite its shortcomings and ongoing debate about reform, the mandatory bid mechanism is becoming a key mechanism in the current market conditions for redistributing corporate control. It serves as a bridge between fundamental asset undervaluation and fair compensation for minority shareholders, stimulating ownership consolidation and market recovery. Further development of this institution, taking into account both international experience (primarily the American tender offer model) and Russian specifics, will be critical for maintaining a balance of interests between majority and minority shareholders, and the needs of the economy as a whole.