Quick Answer
Tender offers fall into three frameworks: a third-party offer for Exchange Act-registered equity (Schedule TO, third-party and universal rules), a going-private transaction (Schedule 13E-3, enhanced fairness disclosure, triggered by dropping below 300 holders, ending or suspending reporting, or delisting), and an issuer self-tender (Schedule TO-I, parallel timing and equal-treatment rules, with its own withdrawal-revival period).
Three statutory hooks govern three different fact patterns. The same tender offer can fall under more than one (an issuer self-tender that takes the company private), in which case the issuer files BOTH schedules. Knowing which framework applies tells you which form gets filed and what disclosure depth is required.
What Is a Third-Party Tender Offer?
The third-party framework is the classic case: an outside bidder makes an offer to the target's shareholders.
- Filed under Schedule TO (under the third-party tender offer rules)
- Subject to ALL of the third-party and universal tender offer rules
- Target must respond on Schedule 14D-9 within 10 business days of commencement
The third-party tender offer rules apply only when the bidder will own more than 5% of the class after consummation. An offer that stays below 5% (a mini-tender) escapes the third-party tender offer rules entirely but still owes anti-fraud compliance under the universal tender offer rules.
Exam Tip: Gotchas
- The third-party tender offer rules' threshold is over 5% beneficial ownership AFTER consummation. If the bidder already owns 3% and tenders for 3% more, post-consummation ownership is 6% and the full third-party tender offer regime applies. Pre-existing ownership counts.
What Triggers a Going-Private Transaction?
The going-private rule is the consequence-based trigger. It applies when an issuer or its affiliate engages in a transaction that has a reasonable likelihood (or a purpose) of taking the company out of public-company status.
Four consequence triggers:
| Trigger | Result |
|---|---|
| Below 300 holders of record | Class becomes eligible for deregistration |
| Termination of Exchange Act reporting | Also tied to the 300-holder threshold |
| Suspension of Exchange Act reporting obligations | A distinct effect from termination; reporting is paused rather than ended |
| Delisting from a national securities exchange | Company is no longer exchange-listed |
Triggering transaction types:
- Issuer purchase of its own equity (in the open market or through a tender offer)
- Issuer tender offer
- Proxy solicitation in connection with an M&A transaction (cash-out merger, freeze-out, reverse stock split designed to cash out small holders)
When the going-private trigger fires, the issuer or affiliate must file Schedule 13E-3 with enhanced fairness disclosure on top of whatever other form would normally apply (Schedule TO-I for an issuer self-tender, Schedule 14A for a proxy-solicitation merger).
What Enhanced Disclosure Does Going-Private Require?
Schedule 13E-3 is not just a notice filing. It carries substantive disclosure obligations designed to protect unaffiliated shareholders from being squeezed out at an unfair price.
Each filer must:
- State whether it reasonably believes the transaction is fair or unfair to unaffiliated security holders, and provide the material factors supporting that belief
- Describe and file as exhibits all reports, opinions, or appraisals materially related to the transaction (including fairness opinions and valuation reports)
- Disclose funding sources, contractual relationships, and past contacts with unaffiliated holders
Think of it this way: The going-private rule turns the standard tender-offer disclosure regime into something closer to a securities offering prospectus. Because the affiliate has an information advantage and is forcing minority shareholders out, the SEC requires a much higher standard of disclosure and substantive fairness analysis.
Exam Tip: Gotchas
- The going-private rule's trigger is the 300-holder, reporting-suspension, or delisting threshold, NOT the 2,000-holder registration threshold. Going private is about getting OUT of public-company status; the 2,000-holder line is the gate for getting IN. Easy to confuse on the exam.
- Termination and suspension of reporting are two separate effects. A transaction with a reasonable likelihood of merely suspending (not ending) the company's Exchange Act reporting obligations still triggers the going-private rule; it does not need to reach full termination.
- Schedule 13E-3 is filed IN ADDITION to the underlying form, not instead of it. An issuer self-tender that takes the company private files Schedule TO-I AND Schedule 13E-3.
What Is an Issuer Self-Tender Offer?
The issuer tender offer rule applies when the issuer, or an affiliate of the issuer, tenders for the issuer's own securities.
- Filed under Schedule TO-I (the "I" variant)
- Subject to its own version of the 20-business-day minimum offering period, withdrawal rights, prompt payment, proration in oversubscribed partial offers, and equal-treatment requirements
- The parallel all-holders and best-price rules live inside the issuer tender offer rule (the third-party rules are mirrored)
- Withdrawal-rights revival differs from the third-party rule: securities not yet accepted for payment become withdrawable again after 40 business days from commencement, not the third-party offer's 60-calendar-day figure
- The issuer or affiliate must also file all written communications relating to the offer, starting with the first public announcement, and neither may purchase the security outside the offer until 10 business days after termination, an issuer-specific tail on top of the general outside-purchase prohibition
Common reasons an issuer runs a self-tender:
- Return capital to shareholders without a regular dividend
- Buy back stock at a fixed premium (rather than gradually through open-market repurchases)
- Modified Dutch auction to find a clearing price for a buyback
- As a step in a going-private transaction
When the self-tender is going-private, both Schedule TO-I and Schedule 13E-3 get filed.
Exam Tip: Gotchas
- Going-private vs issuer self-tender is a frequent trap. The issuer tender offer rule is the MECHANISM (issuer buying back through tender procedure). The going-private rule is the CONSEQUENCE (transaction designed to take the company out of public-company status).
- An issuer self-tender that takes the issuer below 300 holders or off-exchange is ALSO a going-private transaction. Schedule 13E-3 gets filed in addition to Schedule TO-I.
How Do the Three Frameworks Compare?
| Framework | Filer | Schedule | Trigger | Key Distinction |
|---|---|---|---|---|
| Third-party | Third-party bidder | Schedule TO | Tender offer for Exchange Act-registered equity; bidder over 5% after consummation | Default third-party path |
| Issuer tender offer rule | Issuer | Schedule TO-I | Issuer tendering for own equity | Mirror of third-party rules; issuer is the bidder |
| Going-private rule | Issuer or affiliate | Schedule 13E-3 (in addition to underlying form) | Transaction with reasonable likelihood of dropping below 300 holders, terminating reporting, suspending reporting, or delisting | Enhanced fairness disclosure required |
What Should You Check on Exam Day?
- Ask which framework governs before answering: third-party (outside bidder), issuer tender offer rule (issuer buys its own stock), or going-private rule (consequence of dropping below 300 holders, ending reporting, or delisting).
- Do not treat the going-private trigger as a bare "below 300 holders" shortcut; apply the full effects-based test (reasonable likelihood or purpose), including reporting suspension as well as termination.
- Remember Schedule 13E-3 is filed in addition to, never instead of, the underlying Schedule TO-I or Schedule 14A.
- Watch for an issuer self-tender that also crosses a going-private trigger; it requires both schedules.
- Remember an issuer tender offer can be made by the issuer OR an affiliate, and both are barred from buying the security outside the offer until 10 business days after termination.