A Godfather offer is one of the most feared instruments in the world of mergers and acquisitions. It occurs when an acquirer, sometimes referred to as the Godfather, offers to purchase a target company for an exorbitantly high price. Generally, there is an incredibly generous premium above the stock price of the target company which makes it very difficult for the target company's management and board to refuse.

Godfather offers can be seen in hostile takeovers when an acquirer seeks to acquire a company even when the board and management have no intention of selling it. The acquirer typically offers a large sum of money to the shareholders of the target company in hopes of persuading them to accept the acquisition. In many cases, the acquirer will only sweeten the deal if the board agrees to their terms, otherwise they will withdraw their offer.

When faced with a Godfather offer, the target company's management and board must cautiously weigh the cost of a possible hostile takeover versus accepting the offer and potentially losing some control over the company. For many companies, simply accepting the financial offer that is presented is often the most favorable option as it can keep shareholder lawsuits and other forms of revolt at bay.

Without question, a Godfather offer is a powerful tool for an acquirer, and when it is presented, responding quickly and appropriately is of utmost importance for the target company. Ultimately, the decision on whether to accept or reject a Godfather offer must be carefully considered before any action is taken.