The impact of securities regulation in the European Union on M&A: Does it compensate to go beyond borders?

Purpose The purpose of this study is to examine the impact of the transposition of the EU directive that regulates M&As on cross-border deals. Acquirers of targets located in the European Union (EU) must comply not only with takeover rules set individually by member states but also with European Council Directives. The most significant of these Directives in the context of mergers and acquisitions (M&As) is the Takeover Bids Directive (TBD). The intent of the Directive is to ensure equal treatment for all companies launching takeover bids or that are subject to a change in control, providing minimum harmonization rules in view of creating a transparent environment for cross-border takeovers. Design/methodology/approach This study uses the event-study and difference-in-differences approaches. Findings Using a sample of 2,129 M&As conducted between 2000 and 2015, this paper finds positive acquisition synergy for acquirers targeting firms from countries with stronger investor protection rules compared to the average of the EU, but no evidence regarding cross-border deals. The results support the prediction that regulation makes countries diverge more depending on their ex ante level of investor protection. Originality/value This study examines the impact of the enactment of the TBD on announcement returns of M&As in the EU.

Mergers and Acquisitions

This chapter focuses on mergers and acquisitions (M&A), entailing going-private transactions, tender offers, proxy contests, mergers, and similar types of transactions. While the framework established by the SEC and Congress on the federal level is commendable, significant gaps exist. This chapter focuses on these gaps and recommends specified measures that should be implemented. The recommended measures are directed toward elevating the federal government’s role to serve as the principal regulator overseeing the M&A process. Among the measures that should be adopted are that: state anti-takeover statutes should be federally preempted; the legitimacy of tactics undertaken in response to takeover bids should be within the province of federal law; and a necessary condition as to whether an offensive or defensive maneuver is permissible and given effect is whether the requisite shareholder approval has been obtained. Importantly, the recommendations advanced in this chapter do not materially impede M&A transactions, recognize that shareholder voice merits a primary role in this process, and correctly place matters of national policy with the federal government rather than the applicable state of incorporation.

The Financial Instruments and Exchange Law

Japan adopted the Securities and Exchange Law in 1948, modelled on US law. While the securities market rapidly developed at the time of high economic growth, the regulatory system lagged behind the growth of the market. In the aftermath of the ‘bubble economy’, improvement of the regulatory system was sought. Following the UK ‘Big Bang’, Japan launched its financial ‘Big Bang’ in 1996/1997. There was substantial deregulation in this area. The Securities and Exchange Law was replaced by the Financial Instruments and Exchange Law in 2006. Corporate disclosure system as well as the rules on TOB (takeover bids) have been improved.

The Squeeze-out of Minority Shareholders: The Case of Ukraine

The Ukraine, until recently, did not possess a legal framework for the compulsory sale of minority shareholders shares upon takeover of a joint-stock company (squeeze-out). In 2017, with a view of implementing the Directive 2004/25/EC on takeover bids, the national lawmaker adopted new legislation, enabling a person who had acquired a dominant interest in a joint-stock company to require all remaining shareholders to sell them their shares. Since then, squeeze-outs in Ukraine have become a widespread practice.This paper sheds light onto a range of serious shortcomings of the new law. It became clear that the Ukrainian version of squeeze-out essentially deviates from the course set by the Directive. The situation is further affected by the nearly total absence of the stock market in Ukraine. That results in numerous abuses of the minority shareholders rights and to some extent discredits the ideas of a takeover bid and squeeze-out as such.The authors assess the Ukrainian legal framework for squeeze-out from broader historic and comparative perspectives, identify its faulty points and offer specific steps that need to be taken to bring the Ukrainian squeeze-out practice in line with the European standards.

Takeover Bids in Europe in Times of a World-wide Pandemic Threat: A Delicate Balance Between the Fundamental Freedoms and the Protection of Europe’s and the Member States’ Strategic Assets

This paper explores takeover bids in Europe in times of the COVID-19 pandemic. The search for a balance between maintaining the open market as a European achievement and the protection of national security and public order is not a new phenomenon. This search is not easy with the future FDI Regulation and will raise additional questions.The FDI Regulation became very concrete thanks to the COVID-19 pandemic: At the beginning of the crisis, the Commission presented a Communication setting out guidelines for FDI to be applied prior to the regulation.

Shareholders and Takeover Bids: Revisiting the Poison Pill

This chapter assesses change-of-control transactions and the use of the defensive tactic known as the poison pill, a governance tool that often puts boards, rather than shareholders, in charge of a corporation’s response to a takeover. Much as in the MVS context, this separation of ownership of the corporation from its control may invite conflicts of interest, here between boards and shareholders. The chapter then asks how shareholder-driven corporate governance (SCG) can and should inform regulation of this defensive tactic. It also considers management entrenchment theory and the shareholder-primacy norm in the context of changes of control. Both the normative and the positive aspects of SCG make it necessary to revisit the current legal balance between the interests of directors and the interests of target shareholders in takeovers.

The 1980s

This chapter focuses on the 1980s, a market-oriented decade that marked the demise of managerial capitalism. Entrepreneurial ability became more highly prized than managerial competence, and, primarily due to increased takeover activity, a managerial comfort zone from which public company executives had benefitted was substantially eroded. During “the Deal Decade” takeover bids, most conspicuously ones launched by flamboyant corporate “raiders,” provided executives eager to forestall an unwelcome approach with a potent incentive to bolster shareholder returns. Deregulation and liberalized access to capital simultaneously expanded the discretion available to public company executives and intensified competitive pressure on large firms formerly insulated by substantial barriers to entry.