Academics have generated a large empirical literature examining whether antitakeover defenses like poison pills or staggered board provisions decrease the wealth of shareholders in target corporations. Many studies, however, rely primarily on ex post analysis - they consider only how antitakeover defenses (ATDs) influence shareholder wealth after the corporation has been formed and, in some cases, long after the ATD was adopted. This article argues that it may be impossible to fully understand the purpose or effects of ATDs without also considering their ex ante effects. In particular, ATDs may increase net target shareholder wealth ex ante if they encourage nonshareholder groups to make extracontractual investments in corporate team production. The article reviews recent empirical evidence suggesting that shareholders do in fact perceive ATDs as beneficial ex ante. It also explores some implications for contemporary corporate scholarship and the attempt to measure the effects of antitakeover rules.
{"title":"Do Antitakeover Defenses Decrease Shareholder Wealth? The Ex Post/Ex Ante Valuation Problem","authors":"Lynn A. Stout","doi":"10.2139/ssrn.338601","DOIUrl":"https://doi.org/10.2139/ssrn.338601","url":null,"abstract":"Academics have generated a large empirical literature examining whether antitakeover defenses like poison pills or staggered board provisions decrease the wealth of shareholders in target corporations. Many studies, however, rely primarily on ex post analysis - they consider only how antitakeover defenses (ATDs) influence shareholder wealth after the corporation has been formed and, in some cases, long after the ATD was adopted. This article argues that it may be impossible to fully understand the purpose or effects of ATDs without also considering their ex ante effects. In particular, ATDs may increase net target shareholder wealth ex ante if they encourage nonshareholder groups to make extracontractual investments in corporate team production. The article reviews recent empirical evidence suggesting that shareholders do in fact perceive ATDs as beneficial ex ante. It also explores some implications for contemporary corporate scholarship and the attempt to measure the effects of antitakeover rules.","PeriodicalId":117639,"journal":{"name":"LSN: Takeover Law (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-11-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114309387","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper provides large-sample evidence pertaining to the use of and wealth effects associated with provisions for termination fees in merger agreements between 1989 and 1998. The evidence suggests that target termination fee clauses are an efficient contracting device through which target managers compensate bidders for the costs associated with bid negotiation and the potential for information expropriation by third parties. While target fees truncate a normal bidding process, target shareholders gain from higher completion rates and greater negotiated takeover premiums in deals that include target termination fee clauses. Our findings regarding bidder fee provisions indicate that these clauses are used to lock-in a portion of target wealth gains in deals with higher negotiating costs and greater costs associated with bid failure. Compensation for bidder fee provisions appears to take the form of concomitant target fee provisions, and lower bid premiums.
{"title":"Breaking Up is Hard to Do? An Analysis of Termination Fee Provisions and Merger Outcomes","authors":"Thomas W. Bates, M. Lemmon","doi":"10.2139/ssrn.346883","DOIUrl":"https://doi.org/10.2139/ssrn.346883","url":null,"abstract":"This paper provides large-sample evidence pertaining to the use of and wealth effects associated with provisions for termination fees in merger agreements between 1989 and 1998. The evidence suggests that target termination fee clauses are an efficient contracting device through which target managers compensate bidders for the costs associated with bid negotiation and the potential for information expropriation by third parties. While target fees truncate a normal bidding process, target shareholders gain from higher completion rates and greater negotiated takeover premiums in deals that include target termination fee clauses. Our findings regarding bidder fee provisions indicate that these clauses are used to lock-in a portion of target wealth gains in deals with higher negotiating costs and greater costs associated with bid failure. Compensation for bidder fee provisions appears to take the form of concomitant target fee provisions, and lower bid premiums.","PeriodicalId":117639,"journal":{"name":"LSN: Takeover Law (Topic)","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131867698","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This Article explores the relationship between takeovers, legal doctrines, and private ordering. The authors first argue that the sanctioning of the poison pill and the "just say no" defense by Delaware courts was far less consequential than feared by its critics and hoped for by its proponents. Rather, market participants adapted to these legal developments by embracing two adaptive devices - greater board independence and increased incentive compensation - which had the effect of transforming the pill, a potentially pernicious governance tool, into a device that is plausibly in shareholders' interest. Interestingly, however (and, for critics of the pill, disconcertingly), market participants neither tried to change the law or to opt out of it. The authors then place these developments in a broader perspective. It draws a distinction between bilateral devices - which enjoy support from both stockholders and managers - and unilateral devices and argues that bilateral devices are more likely to be welfare enhancing, more stable, are privileged by Delaware law, and tend to further Delaware's status as leading domicile for public corporations. Greater board independence and increased incentive compensation are examples of such bilateral devices. The authors conclude by examining why Delaware courts embraced the poison pill (at the time, a largely unilateral device, albeit one with bilateral features) and how they should deal with the use of pills by companies with staggered boards.
{"title":"How I Learned to Stop Worrying and Love the Pill: Adaptive Responses to Takeover Law","authors":"Marcel Kahan, Edward B. Rock","doi":"10.2139/SSRN.310019","DOIUrl":"https://doi.org/10.2139/SSRN.310019","url":null,"abstract":"This Article explores the relationship between takeovers, legal doctrines, and private ordering. The authors first argue that the sanctioning of the poison pill and the \"just say no\" defense by Delaware courts was far less consequential than feared by its critics and hoped for by its proponents. Rather, market participants adapted to these legal developments by embracing two adaptive devices - greater board independence and increased incentive compensation - which had the effect of transforming the pill, a potentially pernicious governance tool, into a device that is plausibly in shareholders' interest. Interestingly, however (and, for critics of the pill, disconcertingly), market participants neither tried to change the law or to opt out of it. The authors then place these developments in a broader perspective. It draws a distinction between bilateral devices - which enjoy support from both stockholders and managers - and unilateral devices and argues that bilateral devices are more likely to be welfare enhancing, more stable, are privileged by Delaware law, and tend to further Delaware's status as leading domicile for public corporations. Greater board independence and increased incentive compensation are examples of such bilateral devices. The authors conclude by examining why Delaware courts embraced the poison pill (at the time, a largely unilateral device, albeit one with bilateral features) and how they should deal with the use of pills by companies with staggered boards.","PeriodicalId":117639,"journal":{"name":"LSN: Takeover Law (Topic)","volume":"56 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-05-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125864893","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Hubert de la Bruslerie, Catherine Deffains-Crapsky
In this paper, we develop a contingent claim analysis concerning both inside and outside shareholders' rights to sell their shares at the acquisition bid price. We will show that this regulation brings about wealth transfer towards inside shareholders (compared to a situation without any guarantee). A second question can be formulated as follows: why, in an apparently irrational way, do the outside shareholders, who may benefit from a price guarantee, not systematically sell their shares? That question emphasizes on the outside shareholders' behavior. In theory, it appears that equal treatment between inside and outside shareholders may lead outside ones to sell their shares. We put into evidence that an unconditional price guarantee for minor investors induces an apparent transfer of wealth which is equal to the put option they are given. This implicit put is evaluated as an abandon option. The improvement in the treatment of the outside investors can be a pure illusion because a rational buyer should take it into account in his economic setting of the takeover bid. This put is paid by the new controlling investor who is aware of that. What is also outlined is that, in fact, the price guarantee mechanism imply a disclosure of information because the buyer is led to evaluate wealth transfer implied by the financial regulation of some European countries. The buyer is not passive, he can play with the bid acquisition price and the target participation rate. Moreover, to minimize the cost of a given put option, the major shareholder can increase his participation rate. In doing that, he will tend to expel the minor investors by exercising their put option. We saw that, in this framework, a unique equilibrium exists between the two parties, each one maximizing its wealth in this new environment. It is quite possible that this equilibrium can be the same (or can be better) for the outside investors compared with a no protection case. We also noticed that a more general setting of the choices should also take into account the possibility of direct appropriation of the cash-flow by the controlling investor.
{"title":"Takeover Bids, Price Offer and Investors Protection","authors":"Hubert de la Bruslerie, Catherine Deffains-Crapsky","doi":"10.2139/ssrn.269329","DOIUrl":"https://doi.org/10.2139/ssrn.269329","url":null,"abstract":"In this paper, we develop a contingent claim analysis concerning both inside and outside shareholders' rights to sell their shares at the acquisition bid price. We will show that this regulation brings about wealth transfer towards inside shareholders (compared to a situation without any guarantee). A second question can be formulated as follows: why, in an apparently irrational way, do the outside shareholders, who may benefit from a price guarantee, not systematically sell their shares? That question emphasizes on the outside shareholders' behavior. In theory, it appears that equal treatment between inside and outside shareholders may lead outside ones to sell their shares. We put into evidence that an unconditional price guarantee for minor investors induces an apparent transfer of wealth which is equal to the put option they are given. This implicit put is evaluated as an abandon option. The improvement in the treatment of the outside investors can be a pure illusion because a rational buyer should take it into account in his economic setting of the takeover bid. This put is paid by the new controlling investor who is aware of that. What is also outlined is that, in fact, the price guarantee mechanism imply a disclosure of information because the buyer is led to evaluate wealth transfer implied by the financial regulation of some European countries. The buyer is not passive, he can play with the bid acquisition price and the target participation rate. Moreover, to minimize the cost of a given put option, the major shareholder can increase his participation rate. In doing that, he will tend to expel the minor investors by exercising their put option. We saw that, in this framework, a unique equilibrium exists between the two parties, each one maximizing its wealth in this new environment. It is quite possible that this equilibrium can be the same (or can be better) for the outside investors compared with a no protection case. We also noticed that a more general setting of the choices should also take into account the possibility of direct appropriation of the cash-flow by the controlling investor.","PeriodicalId":117639,"journal":{"name":"LSN: Takeover Law (Topic)","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124748228","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Schemes of arrangement can be used as an easier vehicle in a corporate acquisition. An approved scheme is binding on all including shareholders. The issue is how shareholders particularly minority in target company can be treated under a scheme. The main objective of this paper is to analyze key changes of legal framework of schemes of arrangement after coming new Code in force, and to evaluate the rights of minority shareholders in a scheme of arrangement which results in the transfer of control of a company. It further attempts briefly to acquire basic understanding of schemes as well as to consider certain factors, in the form of pros, which may make a scheme more attractive than an offer, and some disadvantages which may make it more appropriate for a bidder to proceed with a takeover by way of an offer. This writing is mostly analytical in nature, and largely based on secondary materials like books, articles, and several online writings. Primary sources of law including certain foreign judicial decisions have also been used in this paper. The scope of this article is limited as it is going to concentrate on only the use scheme of arrangement for takeover purpose and mainly within Malaysian legal authority. Scheme proposed between company and its creditors is also beyond the ambit of this writing. It does not want to argue that whether treatment of all involved in a scheme is fair rather it seeks to extend the debate in a new direction by stating rights of shareholders including minority are being protected under a scheme of arrangement especially after changes.
{"title":"Schemes of Arrangement in Malaysia: Pre & Post 2010","authors":"S. Alam, Mohammed Dulal","doi":"10.9790/487X-16322028","DOIUrl":"https://doi.org/10.9790/487X-16322028","url":null,"abstract":"Schemes of arrangement can be used as an easier vehicle in a corporate acquisition. An approved scheme is binding on all including shareholders. The issue is how shareholders particularly minority in target company can be treated under a scheme. The main objective of this paper is to analyze key changes of legal framework of schemes of arrangement after coming new Code in force, and to evaluate the rights of minority shareholders in a scheme of arrangement which results in the transfer of control of a company. It further attempts briefly to acquire basic understanding of schemes as well as to consider certain factors, in the form of pros, which may make a scheme more attractive than an offer, and some disadvantages which may make it more appropriate for a bidder to proceed with a takeover by way of an offer. This writing is mostly analytical in nature, and largely based on secondary materials like books, articles, and several online writings. Primary sources of law including certain foreign judicial decisions have also been used in this paper. The scope of this article is limited as it is going to concentrate on only the use scheme of arrangement for takeover purpose and mainly within Malaysian legal authority. Scheme proposed between company and its creditors is also beyond the ambit of this writing. It does not want to argue that whether treatment of all involved in a scheme is fair rather it seeks to extend the debate in a new direction by stating rights of shareholders including minority are being protected under a scheme of arrangement especially after changes.","PeriodicalId":117639,"journal":{"name":"LSN: Takeover Law (Topic)","volume":"676 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123831151","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, I focus on corporate control contestability as a policy objective for company law reform. In part I, I consider the impact of large shareholdings disclosure on the market for corporate control. I suggest that a policy maker should fix the shareholdings' threshold and the delay for disclosure by taking into account the need for both transparency and corporate control contestability. In part II, I examine the technical barriers to takeovers which have been expressly regulated by national rules. I argue that these rules have a limited impact on the contestability of corporate control and that their practical effect might simply be to re-orient defensive actions towards different techniques. In any case, regulation could hardly cover all takeover barriers. In part III, I consider U.S. takeover defences, asking whether and to what extent they should be admitted in Europe. I examine both pre-bid and post-bid defences and compare their different handling under U.S. and E.U. law. I suggest that the rule providing that post-bid defences should be authorised by the shareholders' meeting appears to be preferable, despite the shareholders' collective action problems, to a rule leaving wide discretion to the board of directors. I also argue that market rules, such as those included in the City Code, may function as substitutes for defensive measures in view of shareholder value enhancement. In part IV, I analyse the mandatory bid rule (MBR). A trend is emerging in legislation which is directed at mitigating the impact of mandatory bids on transfers of corporate control. I examine this trend and conclude that, presumably, a lower number of efficient transfers of control will be deterred by these rules, but a higher number of inefficient transfers will be allowed if the bid's price is lower than that paid for the controlling block.
{"title":"Share Ownership, Takeover Law and the Contestability of Corporate Control","authors":"G. Ferrarini","doi":"10.2139/SSRN.265429","DOIUrl":"https://doi.org/10.2139/SSRN.265429","url":null,"abstract":"In this paper, I focus on corporate control contestability as a policy objective for company law reform. In part I, I consider the impact of large shareholdings disclosure on the market for corporate control. I suggest that a policy maker should fix the shareholdings' threshold and the delay for disclosure by taking into account the need for both transparency and corporate control contestability. In part II, I examine the technical barriers to takeovers which have been expressly regulated by national rules. I argue that these rules have a limited impact on the contestability of corporate control and that their practical effect might simply be to re-orient defensive actions towards different techniques. In any case, regulation could hardly cover all takeover barriers. In part III, I consider U.S. takeover defences, asking whether and to what extent they should be admitted in Europe. I examine both pre-bid and post-bid defences and compare their different handling under U.S. and E.U. law. I suggest that the rule providing that post-bid defences should be authorised by the shareholders' meeting appears to be preferable, despite the shareholders' collective action problems, to a rule leaving wide discretion to the board of directors. I also argue that market rules, such as those included in the City Code, may function as substitutes for defensive measures in view of shareholder value enhancement. In part IV, I analyse the mandatory bid rule (MBR). A trend is emerging in legislation which is directed at mitigating the impact of mandatory bids on transfers of corporate control. I examine this trend and conclude that, presumably, a lower number of efficient transfers of control will be deterred by these rules, but a higher number of inefficient transfers will be allowed if the bid's price is lower than that paid for the controlling block.","PeriodicalId":117639,"journal":{"name":"LSN: Takeover Law (Topic)","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133641480","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The past two decades have witnessed a vigorous continuation of the long-standing debate about the proper role of the corporation in our society. Recently, that debate has centered on the question of who -- the directors or the stockholders -- should have the ultimate power to decide whether the corporation should be sold to a bidder that offers to buy all the corporation's shares at a substantial premium above the current stock market price. The contestants in this debate have been unable to reach any middle ground. That impasse is due in part to ideological differences between the two schools, but it is also due in part to a general satisfaction with the results achieved by the current state of Delaware corporate fiduciary law, which incorporates elements of, and balances, both positions. To relocate the debate to a different and perhaps more fruitful path, the authors suggest an approach that might provide a middle ground between the these two schools: corporate election reform. This Article raises, for discussion purposes only, the issue of whether it is possible to reform the director election process to increase director accountability to the stockholders while at the same time creating a cadre of directors having considerable flexibility to respond to takeover offers in a manner appropriately sensitive to shareholder interests. To stimulate more productive discussion about the nature of the corporation and the role of corporate law, the authors propose -- without embracing -- a reform that they suggest might have this effect.
{"title":"The Great Takeover Debate: A Meditation on Bridging the Conceptual Divide","authors":"W. T. Allen, Jack B. Jacobs, L. Strine","doi":"10.2307/1600641","DOIUrl":"https://doi.org/10.2307/1600641","url":null,"abstract":"The past two decades have witnessed a vigorous continuation of the long-standing debate about the proper role of the corporation in our society. Recently, that debate has centered on the question of who -- the directors or the stockholders -- should have the ultimate power to decide whether the corporation should be sold to a bidder that offers to buy all the corporation's shares at a substantial premium above the current stock market price. The contestants in this debate have been unable to reach any middle ground. That impasse is due in part to ideological differences between the two schools, but it is also due in part to a general satisfaction with the results achieved by the current state of Delaware corporate fiduciary law, which incorporates elements of, and balances, both positions. To relocate the debate to a different and perhaps more fruitful path, the authors suggest an approach that might provide a middle ground between the these two schools: corporate election reform. This Article raises, for discussion purposes only, the issue of whether it is possible to reform the director election process to increase director accountability to the stockholders while at the same time creating a cadre of directors having considerable flexibility to respond to takeover offers in a manner appropriately sensitive to shareholder interests. To stimulate more productive discussion about the nature of the corporation and the role of corporate law, the authors propose -- without embracing -- a reform that they suggest might have this effect.","PeriodicalId":117639,"journal":{"name":"LSN: Takeover Law (Topic)","volume":"101 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122539766","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：