How Do Boards Exercise Their Discretion to Resist Takeover Bids?

If a U.S. firm is a takeover target, it is almost entirely up to its board to decide whether to offer resistance, i.e., to formally reject a specific bid, and potentially take financial or operational actions to defend against the bid. Such actions include standstill agreements, litigation, asset/liability restructurings, and targeted repurchases. In contrast, boards in the UK and most EU countries — those that have adopted Article 9 of the E.U. Takeover Directive — are largely prevented from taking any action that could frustrate the bid, unless it has been duly considered and approved by stockholders. There has long … Read more

The Impact of Go-Shop Provisions in Merger Agreements

Target firms typically employ either an auction or a negotiation method during merger negotiations. In auction deals, the pre-public takeover process involves contacting several potential bidders, signing confidentiality/standstill agreements and accepting private bids. In negotiation deals however, the target engages with only one bidder in the pre-public takeover process. Using either selling method, the target board negotiates with the bidder(s) and if an acceptable price is obtained from a bidder, a definitive merger agreement is signed and a public announcement is made. Typically, after the public announcement of a merger agreement, target boards do not actively solicit new bids although … Read more