Tender Offers

On April 16, 2026, the Division of Corporation Finance (Division) of the U.S. Securities and Exchange Commission issued an exemptive order (Order), effective immediately, that changes certain rules pertaining to tender offers of securities. The Order covers tender offers for both reporting and nonreporting companies.

The Division’s stated rationale for the Order is threefold: (1) to address market inefficiencies created by the 20-business-day minimum offer period; (2) to reflect technological advancements that enable faster dissemination of, and access to, offer materials; and (3) to reduce offerors’ and security holders’ exposure to unnecessary market fluctuations during the offer period.

Shorter Offer Period for Private Companies

Most notable in the Order, tender offers conducted by private companies, as well as by wholly owned subsidiaries of such issuers for the issuer’s own securities, will now be subject to a 10-business-day minimum offer period.

There are some conditions for this new relief to apply:

• Cash-only, fixed-price consideration. The consideration offered must consist solely of cash at a fixed price.
• Early notice of price or percentage changes. Any change to the percentage of securities sought (beyond the 2% de minimis threshold) or to the amount of cash offered must be communicated to holders no later than 9 a.m. Eastern time on the fifth business day before expiration.
• Notice of other material changes. Any other material change in the terms of the offer must be communicated no later than 9 a.m. Eastern time on the second business day before expiration.

Notably, the Order does not grant any relief to third-party led tender offers, which is expected to result in a clear timing advantage for issuer-led liquidity transactions for private companies.

Shorter Offer Period for Public Companies

For third-party tender offers subject to Regulation 14D, a shortened 10-business-day period is available but only when (i) the offer is made pursuant to the terms of a negotiated merger agreement or similar business combination agreement between the target company and the offeror and (ii) the offer is made for all outstanding securities of the subject class. In addition, the target company must file and disseminate a Schedule 14D-9 no later than 5:30 p.m. Eastern time on the first business day following commencement.

By contrast, for issuer self-tenders subject to Rule 13e-4, the abbreviated period is available when the offer is made for less than all outstanding securities of the subject class.

Conditions Applicable to All Public Company Tender Offers

Regardless of whether the tender offer is a third-party offer or an issuer self-tender, all of the following conditions must be satisfied:

• Cash-only, fixed-price consideration. The consideration offered must consist solely of cash at a fixed price.
• No going-private transactions. The offer must not be subject to Exchange Act Rule 13e-3.
• No cross-border exemptions. The offer must not be made in reliance on the cross-border exemptions under Exchange Act Rule 14d-1(d) or Rule 13e-4(i).
• No competing offer at launch. At the time the offer is publicly announced, the subject securities must not already be the subject of another pending or previously announced tender offer by a different offeror.
• Extension required if a competing offer emerges. If a competing tender offer is publicly announced after commencement, the initial offeror must extend its offer so that it remains open for at least 20 business days from the date it originally commenced.
• Press release with hyperlink at launch. The offer must be announced via a widely disseminated press release or wire service by 10 a.m. Eastern time on the commencement date, including basic terms (identity of offeror, class of securities, consideration, and expiration date) and an active hyperlink to a website where holders can access the tender offer materials.
• Early notice of price or percentage changes. Any increase or decrease in the percentage of securities sought (beyond a 2% de minimis threshold) or any change in the consideration offered must be publicly announced no later than 9 a.m. Eastern time on the fifth business day before expiration.
• Notice of other material changes. Any other material change in the terms of the offer must be publicly announced no later than 9 a.m. Eastern time on the second business day before expiration.

Key Takeaways

The Order offers meaningful practical improvements for liquidity transactions structured as tender offers.

Most significantly, and in light of the increased prevalence of liquidity transactions, including tender offers, in tech among privately held venture capital and private equity-backed companies, parties should now give serious consideration to the meaningful timing advantage that an all-cash issuer-led tender offer would present as compared to other structured liquidity transactions. In addition, for public companies, the Order now offers greater flexibility in aligning tender offer timelines with other typical deadlines that arise in such transactions, including proxy timelines, antitrust, equity compensation, and the Committee on Foreign Investment in the United States.

Of course, the Division expressly noted that all antifraud and antimanipulation provisions of the federal securities laws continue to apply — including Sections 10(b) and 14(e) of the Exchange Act and the rules promulgated thereunder — and that responsibility for compliance with all applicable federal securities laws rests with the offeror.

The last few years have seen a wide proliferation of secondary liquidity programs among VC- and PE-backed technology companies. Late-stage private company VC and growth financings now typically feature a secondary component, and it is not unusual to see secondary-only transactions among revenue-positive technology companies. The wide adoption of these transactions has brought with it a changing landscape of liquidity timeline expectations, valuations, and terms. Additionally, these programs often require careful structuring and a variety of legal and business considerations that are novel even to many experienced executives in technology companies.

Tender Offers vs. Secondary Transactions

When a high-growth company begins thinking about providing liquidity to its shareholders while it is still private, the first question that arises is whether the proposed transaction will be a “Tender Offer” (a legal term that brings with it a number of additional regulatory requirements) or a one-off secondary (a less regulated bilateral agreement between two parties). The determination is often made by legal counsel with reference to the Wellman test, a fairly dated eight-factor legal test that stems from a case called Wellman v. Dickinson. That said, the Wellman test is fairly straightforward and most of the eight prongs are usually met in a “typical” secondary program, in which case the analysis often comes down to the first two prongs, which are determined by reference to the number of potential eligible sellers and what percentage of the overall outstanding company capitalization they represent. The standard is subjective and depends on facts and circumstances – for instance, if an offer is made to hundreds of shareholders representing 10%+ of the company’s outstanding capitalization, you are most likely looking at a Tender Offer.

Tender Offer Rules

Tender Offers implicate U.S. corporate, tax, and securities law, and can equally implicate foreign laws when the eligible sellers are abroad. Private company Tender Offers, however, do offer significantly more flexibility than public company Tender Offers (i.e., no schedules, no SEC review, and more structuring flexibility with respect to the offering terms):

Securities Law

Section 14(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), including the antifraud and antimanipulation provisions contained therein, as well as the extensive rules and regulations promulgated thereunder, including Regulation 14E, must always be considered and consulted when conducting a Tender Offer. Most notably, Tender Offers typically require a disclosure document, a reasonable means to tender the securities, and a minimum open period during which eligible sellers can consider whether or not to participate in the Tender Offer.

It is important to note that, on April 16, 2026, the U.S. Securities and Exchange Commission (SEC) issued an exemptive order that changed some of the rules pertaining to Tender Offers, including the minimum offering period for offers conducted by the company itself rather than directly by a third-party purchaser. An article summarizing these changes is also available on Sidley Catalyst.

In each jurisdiction where an offer is made, including foreign jurisdictions and any relevant U.S. state, local securities laws should also be reviewed.

Corporate Law

Tender Offers conducted by a third-party purchaser implicate corporate law governing transfers of securities and, as is typical for VC-backed technology companies, potential transfer restrictions. Tender Offers may also inadvertently trigger “Deemed Liquidation Event” provisions in the company’s governing documents.

Tender Offers conducted by the company that issued the securities in the first place may implicate rules concerning repurchases or redemptions of securities, impairment of capital, and dividends.

Of course, shareholder protective provisions and other restrictive covenants in equity and debt agreements must be consulted.

Lastly, Tender Offers often implicate interested party and corporate opportunity considerations, as executives and board members are also often eligible to participate, and careful consideration must be given to cleanse any such issues via relevant corporate law provisions.

Tax Law

Tender Offers require extensive tax planning, both with respect to the impact on eligible sellers and on holders of stock options or other employee equity. Section 409A deferred-compensation rules, dividend rules, compensatory versus capital gains treatment, and other tax rules may all be implicated if not carefully structured. It is typically expected that eligible sellers will receive some level of disclosure with respect to potential tax implications of their investment decision.

Structuring Considerations

There are two primary decisions that any company contemplating a Tender Offer must consider at the outset:

1. Eligibility Criteria. Who should be eligible to sell their securities in the Tender Offer? A number of factors are typically considered here, including:
   1. Will the Tender Offer proceeds have a positive or negative impact on employee retention?
   2. Are there early investors who require returns for their funds?
   3. Will there be a “consolidation” effect on the cap table? Will some shareholders be happy to sell and separate from the company sooner than others?
   4. Will there be an expectation of continued liquidity programs?
   5. Will there be a positive or negative impact on the company’s valuation?
   6. How will this impact public perception of the company and its shareholders?
2. Identity of Purchasers. Will this be a direct third-party purchase by a single purchaser or a group of purchasers, or will it be conducted as a repurchase by the company of its own securities? The differences between the two can impact the following:
   1. Time period required for the Tender Offer to remain open.
   2. Primary responsibility for preparing the Tender Offer documents and for the accuracy of those documents.
   3. Difference in fees and costs associated with the Tender Offer.
   4. Whether the company has funds to conduct the Tender Offer or whether such funds must be raised from third-party sources.

Less pressing, but nonetheless important, considerations include which party will pay the fees and costs of the Tender Offer, whether the purchaser will require additional investor rights or side letters, whether any third-party portals or paying agents will be used, and how decisions regarding eligibility, extensions, and the like will be made.

Pricing the Tender Offer

The price offered for the company’s securities in a Tender Offer is often the result of negotiation. That said, there are a few considerations that repeatedly come up as the potential purchaser is considering what price to set for the Tender Offer:

1. The price paid for the company’s securities in the most recent fundraising round. Law firms, secondary market platforms, banks, and others with significant experience in these transactions now have plenty of statistics to share with their clients regarding typical pricing for Tender Offers vis-à-vis the last round, how much time has passed, any discounts, and so on.
2. The likely impact on future fundraising and liquidity opportunities. Tender Offers in companies nearing a liquidity transaction are very common, and pricing in the Tender Offer may indicate the likely valuation the company’s securities will receive in an IPO or M&A transaction. Thus, the pricing serves as a “signal” out to the marketplace as much as to the selling shareholders.
3. The likely impact on the shareholder base. If the company’s shareholders have been signaled for years that they are holding very valuable stock, a discounted price in the Tender Offer may lead to disappointed employees and investors, even though the offer may look like a great deal to the purchaser.
4. Impact on equity incentives. A highly priced Tender Offer may have an impact on the valuation of the company’s securities, including the exercise price of its stock options and the value of its RSAs and RSUs. Depending on which securities are used for equity incentives at the company, the price paid for securities by a third party may require a change of course after the transaction. Companies may also want to consider an exercise or grant freeze during the Tender Offer period, which may impact the company’s ability to hire or retain talent while the offer is open.

Timing and Disclosures

Finally, any company considering a Tender Offer must do so in the context of potential upcoming major transactions, changes in leadership, launches, or other major events that would be viewed as material to an investment decision and therefore would require disclosure to the eligible sellers. Typically, as well, some level of financial information is provided as part of the Tender Offer disclosures, and companies often think about the publicity and timing implications of this. As such, the likely timing of the offering and how it fits within the company’s and the investors’ broader timelines is an important consideration that should be proactively addressed prior to the launch of any Tender Offer.