Unsolicited Approaches - A lesson from GME/EBAY

One of the more interesting finance stories of the past two weeks has been GameStop's unsolicited bid for eBay.

Whether you think Ryan Cohen is a visionary or an agent of chaos looking to create a BIG payday, it's a useful teaching example for how M&A actually works because this one played out almost entirely in public.

Most people imagine acquisitions go something like this:

Company A wants Company B → deal announced.

They can, when they’re friendly negotiated deals, but unsolicited deals are often messier. I thought this would be a good time to review what the unsolicited/M&A process sometimes looks like, using GME/EBAY as a live case study:

1️⃣ Accumulate & approach Before making any offer, GameStop quietly built an economic position in eBay starting February 4th, buying up shares and entering derivatives contracts. They sent a non-binding proposal directly to eBay's board and publicly announced it on May 3rd. No prior conversations. No relationship-building. This is what a “hostile” (unsolicited) approach looks like in practice.

2️⃣ The Board reviews eBay acknowledged receipt and said it would evaluate the proposal with its financial and legal advisors. The board's stated focus: the value of the GameStop stock component, and whether merging with GME would create value for their shareholders.

The offer was $125/share (50% cash, 50% GME stock) — a 46% premium to eBay's unaffected price on Feb. 4th (when GME started buying shares), but only about 20% above where eBay was actually trading when the bid was sent and made public (May 1 closing of $104.07). The market reacted by trading up the shares to $109.33 on May 4th… clearly showing the market’s skepticism that this deal would happen.

3️⃣ The response eBay's board rejected it publicly calling it "neither credible nor attractive." They cited several concerns: eBay's standalone prospects, financing uncertainty, impact on long-term growth, leverage and operational risk, valuation implications, and GameStop's governance structure. Notice how the rejection letter emphasizes what will deliver “long-term value for our shareholders”.

The financing question is worth pausing on: GameStop had ~$9.4B in cash and a $20B highly-confident letter from TD Securities but the deal was valued at ~$55.5B. That gap, and the reliance on GME stock as currency (a volatile meme stock that is down 24% in the last year and down 45% in the last 5 years – remember the saga of Roaring Kitty?), is exactly the kind of credibility problem that sinks proposals before they start.

This deal seems to be on indefinite pause, but if it had moved forward, here's what would’ve come next:

4️⃣ Due diligence Both sides sign NDAs, open data rooms, and lawyers, bankers, and accountants spend weeks stress-testing every assumption in their models. Financials, contracts, liabilities, regulatory exposure, customer concentration, technology infrastructure are all reviewed. No skeletons are left hiding in the closet.

5️⃣ Negotiating final terms Price is just one variable. Structure, financing mix, break fees (who pays if the deal falls apart and why), working capital levels, governance of the combined company, management retention, and timing all get negotiated.

6️⃣ Signing → regulatory review → closing A deal this size would likely face some antitrust scrutiny (though like Bruno, we don’t talk about that). After signing, both companies file with regulators (Hart-Scott Rodino (HSR) in the US), and the clock starts on a review period that can take months. Only after clearance do the shareholders vote, and a deal actually closes.

The real lesson from GameStop/eBay isn't just that the deal was crazy (or we like a good headline), it's that the first question in any M&A process is "Is this financeable, credible, and executable?"

When the answer to that is unclear, the market will tell you immediately. eBay's stock barely moved toward the offer price. That's the market saying: we don't believe this closes.

I like a good comeback story as much as the next guy (and I’m still rooting for you GME), so I’m excited to see what they do next.