This statement will be discussed : "Without the process effects generated by the availability of takeover defense in the United States, the Williams Act would not be fit for purpose"
The United States is among the countries the most favorable to the use of takeover defenses. A takeover defense is a measure taken by a corporation's management to discourage or defeat any hostile takeover targeting the firm. Various commentators argue that the availability of takeover defenses creates beneficial processes, the bidder having to negotiate with the incumbent managers. This would allow managers to bargain for a better offer and maximize the benefits for shareholders.
The 1960's marked a dramatic increase in the number of takeovers, and cash tender offers were not regulated. Individual shareholders experienced difficulties in obtaining information about the bidder and the offer, and therefore could not evaluate properly whether the offer was worth being accepted. Many aggressive bidders qualified as "raiders" put pressure on shareholders to get controlled of companies at unfair prices.
The Williams Act, enacted in 1968, addressed shareholder's difficulties in obtaining information from the through Section 13(d) of the Securities Exchange Act of 1934. Its purpose was to give shareholders all the necessary information in order to better evaluate tender offers. Additionally, the Williams Act tried to give managers opportunities to express their views on the offer to stockholders.
[...] The poison pill is certainly the most efficient defence. Most of publicly held companies are equipped with a poison pill. Those who do not have one can easily get one, even after a bid is announced, as it is relatively easy to set up. The bidder could negotiate with the board of directors the redeeming of the pill, or try to win a proxy contest. The advantage of a staggered board as a takeover defence combined with the pill is that it makes this option very difficult. [...]
[...] Individual shareholders experienced difficulties in obtaining information about the bidder and the offer, and therefore could not evaluate properly whether the offer was worth being accepted. Many aggressive bidders qualified as “raiders” put pressure on shareholders to get controlled of companies at unfair prices. The Williams Act, enacted in 1968, addressed shareholder's difficulties in obtaining information from the through Section 13(d) of the Securities Exchange Act of 1934. Its purpose was to give shareholders all the necessary information in order to better evaluate tender offers. Additionally, the Williams Act tried to give managers opportunities to express their views on the offer to stockholders. [...]
[...] They can then disclose to shareholders the information to allow them to make the best decision possible, and give them meaningful advice on whether to accept or not the offer. Directors can also negotiate in order to obtain a better offer, benefiting the shareholders. Moreover, the Williams Act does not totally stop some bidders from behaving aggressively. Bidders can still act aggressively after passing having completed the process of Section 13(d). The takeover defences goes further in stopping bidders' aggressive behaviour. [...]
[...] This essay argues that the purpose of the Williams Act is better achieved thanks to takeover defences. The strong processes imposed by the availability of takeover defences First, many US States have adopted statutes that have given directors and managers the ability to make takeovers more difficult. Secondly, some defences were the product of the liberty of contract. Two main defences merit attention. In many publicly held companies, the board of directors is a “staggered board”, meaning that the directors are not all elected at the same time. [...]
[...] As such, the Williams Act achieves a goal that the takeover defences fail to achieve if the managers have an opaque behaviour and pursue their interest instead of the shareholders' interest. Conclusion Without takeover defences, the Williams Act would still be fit for purpose, but the result would not be satisfactory enough. The purpose of the Williams Act is better achieved thanks to takeover defences. The Williams Act or the takeover defences by themselves reach the positive results that we identified previously. However, it is from the combination of both that the most efficient result is achieved. [...]
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