The Law and Economics of Takeovers
This book studies takeovers from the acquirer's perspective. More precisely, the book focuses on the UK's legal and regulatory treatment of the risks faced by the acquiring company shareholders in takeovers. The identified risks are categorized into two main groups - risks generated by managerial choices and regulatory or external risks. The analysis considers the legal context, but also draws on the economic literature, seeking to map the area under consideration and to suggest measures to improve the present position from both legal and economic perspectives. The book examines various methods of protecting the acquiring shareholders against value-decreasing or self-interested acquisitions, such as the class transaction rules, fiduciary duties, the acquiring directors' responsibilities under the UK Takeover Code, the court scheme procedure, the role of institutional shareholders and reward strategies, and methods of making the acquiring directors more exposed to the discipline of the market. The effects of the choice of the medium of payment are also covered. In addition, The Law and Economics of Takeovers covers the Code's position with regards to auction situations and seeks to identify ways of addressing the acquiring shareholders' interests in auctions, including auctions where buyout teams or white Knights are involved. Moreover it identifies situations where deviations from horizontal equality rules, which increase takeover premia, are or should be recognized. To that effect, the Code's rules on mandatory bids, the determination of the price and the form of payment offered, partial offers, and squeeze outs are considered. The analysis covers both hostile and friendly situations. In relation to hostile takeovers, the legal and regulatory framework of toehold strategies is analyzed. Market abuse issues in relation to stake building are also highlighted. In relation to friendly takeovers, the operation of lock-up agreements and break fees - Code's requirements, fiduciary law, financial assistance, and other contract law concerns - are also explored. Finally, the UK's Panel on Takeovers and Mergers' position on adverse changes, pre-conditions and conditions on which the offer can be subject to, and the bidder's exposure to Material Adverse Change risk are assessed.
Publication Date: 5/19/2008