Rick Schumans, I6083897
Comparative Company Law
Readings 5: Market for corporate control
Mandatory Reading Materials
Cahn & Donald, ‘Comparative Company Law’
25. Management interference with takeovers bids
Do shareholders need protection from ofers to buy their shares?
I. The basis for evaluating hostile takeovers as a governance tool
Classic arguments for takeovers as a necessary tool: ordinary
government is not efective, the stock price refects the true value
of the frm under the relevant management, concentrated holdings
bring strong incentives, and gains to selling shareholders
demonstrate the value of takeovers
Two additional positions: auctions increase bid premiums vs.
greater deterrence is more valuable than occasional increases from
auctions
II. Arguments against takeovers
Previously: takeovers to better the corporate governance system
(selling shares to a shareholder who would use its voting power)
not all takeover ofers are good for a company (such as
impoverishing the target but enriching the raider), a takeover only
temporarily concentrates voting rights for eficient use before
releasing them once again to safely diversifed (investment risk!)
but ineficient (governance) holdings, and the current investment
world does not function anymore as it did in the late-20s US system
(no more dispersed holdings but blocs of hedge funds etc. in the
stock market one can use his own voting power better now!)
III. The role of management in shareholders’ decisions on whether
to accept ofers
UK: shuts out management in takeover ofers, except for providing
information to the shareholders, protection in the bid rules (ex
ante!)
1
, Rick Schumans, I6083897
Delaware: entrusting management with the duty of protecting the
company from threatening takeover ofers protective functions to
management in fduciary capacity (ex post!)
IV. Takeovers across borders
Should shareholders be submitted to accept ofers from countries?
Should countries be allowed to take over companies of their friends,
allies, or enemies? IR theory
Seretakis, ‘Hostile Takeovers and Defensive Mechanisms in the UK and
the US: A Case Against the US Regime’
I. Introduction
Hostile takeovers nowadays they are a legitimate weapon for
overcoming resistance by the target’s management EU has
supported vibrant and dynamic takeover market
Hostile takeover = without prior communication to the target’s
management or without the latter’s consent to it
In the UK Takeover Code prohibiting post-bid defences being
available to management
Nowadays in the UK shareholder choice approach (basis for EU
model!)
In the US management are the main actors in the takeover battle
defensive mechanisms reviewed by the courts on the basis of a
fexible business uudgment rule
In public critiques, the UK system comes of as better for hostile
takeovers review of the Takeover Code
Purpose of the article is to defend the current model of the UK
which is swifter and would lose its competitive advantages if the
Code would be reviewed
II. The Theoretical Framework and Takeover Regulation in
the UK
A. The Conventional Wisdom and the Market for Corporate Control
2
Comparative Company Law
Readings 5: Market for corporate control
Mandatory Reading Materials
Cahn & Donald, ‘Comparative Company Law’
25. Management interference with takeovers bids
Do shareholders need protection from ofers to buy their shares?
I. The basis for evaluating hostile takeovers as a governance tool
Classic arguments for takeovers as a necessary tool: ordinary
government is not efective, the stock price refects the true value
of the frm under the relevant management, concentrated holdings
bring strong incentives, and gains to selling shareholders
demonstrate the value of takeovers
Two additional positions: auctions increase bid premiums vs.
greater deterrence is more valuable than occasional increases from
auctions
II. Arguments against takeovers
Previously: takeovers to better the corporate governance system
(selling shares to a shareholder who would use its voting power)
not all takeover ofers are good for a company (such as
impoverishing the target but enriching the raider), a takeover only
temporarily concentrates voting rights for eficient use before
releasing them once again to safely diversifed (investment risk!)
but ineficient (governance) holdings, and the current investment
world does not function anymore as it did in the late-20s US system
(no more dispersed holdings but blocs of hedge funds etc. in the
stock market one can use his own voting power better now!)
III. The role of management in shareholders’ decisions on whether
to accept ofers
UK: shuts out management in takeover ofers, except for providing
information to the shareholders, protection in the bid rules (ex
ante!)
1
, Rick Schumans, I6083897
Delaware: entrusting management with the duty of protecting the
company from threatening takeover ofers protective functions to
management in fduciary capacity (ex post!)
IV. Takeovers across borders
Should shareholders be submitted to accept ofers from countries?
Should countries be allowed to take over companies of their friends,
allies, or enemies? IR theory
Seretakis, ‘Hostile Takeovers and Defensive Mechanisms in the UK and
the US: A Case Against the US Regime’
I. Introduction
Hostile takeovers nowadays they are a legitimate weapon for
overcoming resistance by the target’s management EU has
supported vibrant and dynamic takeover market
Hostile takeover = without prior communication to the target’s
management or without the latter’s consent to it
In the UK Takeover Code prohibiting post-bid defences being
available to management
Nowadays in the UK shareholder choice approach (basis for EU
model!)
In the US management are the main actors in the takeover battle
defensive mechanisms reviewed by the courts on the basis of a
fexible business uudgment rule
In public critiques, the UK system comes of as better for hostile
takeovers review of the Takeover Code
Purpose of the article is to defend the current model of the UK
which is swifter and would lose its competitive advantages if the
Code would be reviewed
II. The Theoretical Framework and Takeover Regulation in
the UK
A. The Conventional Wisdom and the Market for Corporate Control
2
