Corporate Takeover Law and Management Discipline

Dr Francis Okanigbuan Jnr is a Lecturer in the School of Law, Liverpool John Moores University. He was a Post-doctoral Research Fellow on the Arts and Humanities Research Council funded project; ‘Business Judgment and the Courts’ in the Centre for Business Law and Practice, School of Law, University of Leeds. He was a Teaching Assistant at the University of Manchester and Tutor at the Manchester Metropolitan University. He is a graduate-member of the Institute of Chartered Secretaries and Administrators. His research interests include; takeovers (the market for corporate control), corporate law, corporate governance, law and economics of regulation and comparative law.

TABLE OF CONTENTS

Part I

CHAPTER ONE

GENERAL INTRODUCTION

Abstract

1.1 Introduction

1.2 The Persistent Challenges of Corporate Acquisition

1.3 Theoretical Perspectives of Takeovers

1.4 Aim and Scope

1.5 Outline

CHAPTER TWO

THE REGULATORY FRAMEWORK OF INSTITUTIONS

Abstract

2.1 Introduction

2.2 The Neo-classical Economics and the Old Institutional Economics Theories

2.3 The Framework of the New Institutional Economics

2.4 Institutions: Levels of Development and Change

2.5 Main Streams in Economics of Institutions

2.5.1 Property Rights of Shareholders

2.5.2 Transaction Costs Economics (Costs of Takeovers)

2.5.3 Agency Relationship between Managements and shareholders

2.6 How Institutions Can Influence Market Discipline

2.7 Conclusion

CHAPTER THREE

THE THEORETICAL FRAMEWORK OF CORPORATE TAKEOVERS

Abstract

3.1 Introduction

3.2 Types of Corporate Takeover: Nature and Characteristics

3.3 The Takeover Devices

3.3.1 Direct Purchase of Shares (tender offer or open market bid)

3.3.2 Proxy Contests

3.4 The Takeover Hypotheses and Justification for Takeovers

3.4.1 The Disciplinary Hypothesis

3.4.2 The Synergy Hypothesis

3.4.3 The Hubris Hypothesis

3.5 Takeover Defences

3.6 Contractual Relationships: Agency Conflicts and Employment Issues

3.6.1 Agency conflicts

3.6.2 Employment Issues

3.6.3 The Contractual Theory of the Corporation

3.6.4 The Entity Theory of the Corporation

3.7 Conclusion

Part 11

CHAPTER FOUR

TAKEOVER REGULATION IN THE UNITED KINGDOM

Abstract

4.1 Introduction

4.2 The Historical Development of Takeover Regulation in the United Kingdom

4.3 Shareholder Protection

4.3.1 Shareholders of Target Companies

4.3.2 Shareholders of Acquiring Companies

(i) Are Shareholders of Acquiring Companies Protected from Opportunistic Behaviour of Management?

(ii) Do Shareholders of Acquiring Companies Always Record Gains From Takeovers?

(iii) Derivative Action and Personal Actions by Shareholders of Acquiring Companies

4.4 Employment Protection

4.4.1 The Transfer of Undertakings (Protection of Employment) Regulations (TUPE)

4.5 Conclusion

CHAPTER FIVE

THE REGULATORY FRAMEWORK FOR TAKEOVERS IN THE

UNITED STATES (DELAWARE)

Abstract

5.1 Introduction

5.2 The Historical Development of Takeover Regulation

5.3 Shareholders of Target Companies

5.3.1 The Williams Act of 1968

5.3.2. Target Shareholder Protection in Delaware

a) Unocal Corp v Mesa Petroleum Company

b. Revlon Inc v MacAndrews & Forbes Holdings Inc.

5.4 Shareholders of Acquiring Companies

5.4.1 Managerial Conflict of Interests

a) Market power

b) Competition among bidders

c) Managerial Hubris – Corporate Size

5.5 Costly Acquisitions and Employee Dismissal

5.6 Conclusion

CHAPTER SIX

MANAGEMENT BOARD: CORPORATE GOVERNANCE AND THE MARKET FOR CORPORATE CONTROL

Abstract

6.1 Introduction

6.2 Managements Boards and Corporate Governance Administration

6.2.1 Corporate Governance in the United Kingdom

6.2.2 Corporate Governance in the United States

6.3 The Role of Managers in Corporate Acquisitions

6.3.1 Managements of Target Companies

6.3.2 Managements of Acquiring Companies

6.4 Conclusion

Part 111

CHAPTER SEVEN

COMPLEMENTARY INTERESTS OF SHAREHOLDERS AND EMPLOYEES

7.1 Introduction

7.2 Limitations to Employment Protection in Takeovers

(a) Employees as Non-financial Stakeholders

(b) Shareholder Value Approach to Corporate Regulation

7.3 Default Beneficiaries of Corporate Acquisitions

7.3.1 Shareholders in Target Companies

7.3.2 Management Board

7.3.3 Creditors

7.4 Costs of Acquisitions and the Role of Managements

7.5 A New Paradigm for Employment Protection and Shareholder Interests

7.6 Conclusion

CHAPTER EIGHT

JUDICIAL INTERVENTION IN CORPORATE ACQUISITIONS

8.1 Introduction

8.2 Case Search Methodology

8.3 Shareholder Litigations in the United Kingdom

8.4 Judicial intervention in Delaware

8.4.1 Shareholder Application Denied

8.4.2 Successful Shareholder Application

8.5 Conclusion

CHAPTER NINE

A NEW PARADIGM FOR TAKEOVER ADMINISTRATION

Abstract

9.1 Introduction

9.2 The Dominant Role of Managements in Takeovers

9.3 Professionalising Managerial Decisions and Enhancing Market Functions