Definition of stalking horse

An offer or bid designed to test the market for an asset often ahead of a formal auction. A stalking horse bid effectively places a floor underneath a proposed asset sale. Typically, a stalking horse agreement also includes a provision allowing the stalking horse offer maker an option to top any rival bids that emerge.

Example
In 2009, Nokia Siemens agreed a $650m stalking horse offer for Nortel Networks' main wireless assets ahead of a formal auction. Ericsson eventually won the auction by agreeing to pay $1.13bn for the assets, outbidding Nokia Siemens and a third bidder.  [1]

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