In Play

What Does "In Play" Mean?

The term "in play" refers to a firm that becomes a potential takeover target or puts itself up for sale with multiple bidders. When a firm becomes in play, news spreads about the potential deal. Speculation leads the share price to increase in value, making it much more volatile. Once a bid for the firm is made or a sale is possible, a company may attract additional bidders.

Remember — you increase your risk of loss if you make any moves based on speculation.

Understanding "In Play"

Mergers and acquisitions (M&A) are an integral part of the corporate landscape. A larger company often takes over or make deals with a smaller firm when the latter can add value to an acquirer. Corporations of similar sizes may decide to merge in order to cut down costs or because they want to limit the competition.

Mergers and acquisitions can be hostile. In this case, the target firm is not willing to be purchased, which forces the potential acquirer to adopt aggressive tactics and strategies to meet its goals. In other cases, these deals may be friendly, where one party puts in an offer to purchase another corporation, or one party may put itself up for sale and actively seeks a buyer or bidder.

There are many different nuances in the M&A world. For instance, a firm that is the subject of a takeover — usually by one potential acquirer — is referred to as being in play. This term is also used when a company wants to be purchased and is looking for a buyer. The company in play may be looking for strategic partnerships, or may already have one or multiple bidders in line.

When a firm becomes a potential takeover target, its share price may increase. The market may expect that the stock will trade at a premium before or at the final purchase of outstanding shares. For example, in the late 1980s, management at RJR Nabisco made a bid to take the company private in the course of a hostile takeover attempt. This bid put the company in play, and the resulting bidding war elevated the offer ultimately approved by the RJR Nabisco board.

Special Considerations

There may only be rumors that a company is in play. Or there may only be a chance that it's part of a potential merger deal or acquisition, or another type of buyout. At this point, its shares may be referred to as deal stock. These are shares in a public company that may be merged into those of another firm.

As mentioned above, the news that triggers the point when a company is in play is generally only speculative, leading the share price to become more volatile. Being in play normally causes the share price to rise quickly, leading to a potential buyer who may be willing to buy shares at a premium. This may allow the firm to identify prospective buyers or bring more bidders to the negotiating table.