Efficiency and Fairness in Minority Freezeouts PDF Download
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Author: Ernst G. Maug
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Book Description
This paper argues that there is a trade-off between efficiency and fairness in minority freezeouts and that the focus on fairness (minority shareholder rights) may be misplaced. The model discusses alternative rules for valuing minority shares in freezeouts. Appraisals can be based on the stock price, publicly available information, or private information disclosed by the majority shareholder. Those valuation rules that enhance economic efficiency pay minority shareholders less than what their shares are intrinsically worth. Economic efficiency is worse if minority shareholders extract higher premia in freezeouts. Moreover, all freezeout rules induce inefficient takeovers caused by overbidding. Bidders overpay for some shares in order to obtain a valuable freezeout option, which sometimes remains unexercised. The real problem is the freeze-in problem, as minority shareholders are left with lower-valued shares. Efficiency can be restored through a mandatory bid rule.
Author: Ernst G. Maug
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Book Description
This paper argues that there is a trade-off between efficiency and fairness in minority freezeouts and that the focus on fairness (minority shareholder rights) may be misplaced. The model discusses alternative rules for valuing minority shares in freezeouts. Appraisals can be based on the stock price, publicly available information, or private information disclosed by the majority shareholder. Those valuation rules that enhance economic efficiency pay minority shareholders less than what their shares are intrinsically worth. Economic efficiency is worse if minority shareholders extract higher premia in freezeouts. Moreover, all freezeout rules induce inefficient takeovers caused by overbidding. Bidders overpay for some shares in order to obtain a valuable freezeout option, which sometimes remains unexercised. The real problem is the freeze-in problem, as minority shareholders are left with lower-valued shares. Efficiency can be restored through a mandatory bid rule.
Author: Guhan Subramanian
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Freeze-out transactions, in which a controlling shareholder buys out the minority shareholders, have occurred more frequently since the stock market downturn of 2000 and the Sarbanes-Oxley Act of 2002. While freeze-outs were historically executed as statutory mergers, recent Delaware case law facilitates a new mechanism - freeze-out via tender offer - by eliminating entire fairness review for these transactions. This Article identifies two social welfare costs of the current doctrinal regime. First, the freeze-out tender offer mechanism facilitates some inefficient (value-destroying) transactions by allowing the controller to exploit asymmetric information against the minority. Second, the freeze-out merger mechanism may deter some efficient (value-increasing) transactions because of the special committee's ability to block the deal. These negative wealth effects are unlikely to be resolved through private contracting between the controller and the minority. Rather than advocating patchwork reforms to correct these problems, this Article proposes a return to first principles of corporate law in the freeze-out context. The result of this re-grounding would be convergence in judicial standards of review for freeze-outs, and elimination of the efficiency loss that is inherent in existing doctrine. A companion paper, Post-Siliconix Freeze-outs: Theory & Evidence, provides empirical evidence on freeze-outs.
Author: Ely R. Levy
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
Under Delaware law, Directors and officers are relatively free to transact in furtherance of maximizing shareholder value without being second-guessed by courts. In limited instances, however, where directors and officers are self-interested in a particular transaction, this deference disappears and the directors and officers are generally charged with proving the fairness of the self-interested transaction. The Delaware courts have attempted to adapt this fiduciary duty paradigm to develop the contours of the relationship between controlling and minority shareholders. This traditional paradigm has been recently challenged by the Delaware Courts.This Article examines how recent case law (e.g., In re Pure Resources Shareholders Litigation) adversely affects the rights of minority shareholders, particularly in the context of freeze-out and going private transactions. The Article examines the policies underlying fairness review and finds support for its ex post application to interested transactions - irrespective of whether a negotiated merger or tender offer is employed by a controlling shareholder.The article also explores economic theory relating to freezeouts, including the efficiency, social utility, transaction costs, incentives and externalities associated with freeze-outs and fairness review. The article makes the case that these transactions result in inefficiencies and diminish overall social welfare. Moreover, freeze-outs appear to be socially sub-optimal under both the Pareto efficiency model and the Kaldor-Hicks efficiency model. As such, the article argues that fairness review of these inefficient transactions may decrease their incidence or, at the very least, may better incentivize fair dealings between controlling parties and minorities.
Author: Randall K. Morck
Publisher: University of Chicago Press
ISBN: 0226536823
Category : Business & Economics
Languages : en
Pages : 404
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Book Description
Standard economic models assume that many small investors own firms. This is so in most large U.S. firms, but wealthy individuals or families generally hold controlling blocks in smaller U.S. firms and in all firms in most other countries. Given this, the lack of theoretical and empirical work on tightly held firms is surprising. What corporate governance problems arise in tightly held firms? How do these differ from corporate governance problems in widely held firms? How do control blocks arise and how are they maintained? How does concentrated ownership affect economic growth? How should we regulate tightly held firms? Drawing together leading scholars from law, economics, and finance, this volume examines the economic and legal issues of concentrated ownership and their impact on a shifting global economy.
Author: H. Kent Baker
Publisher: John Wiley & Sons
ISBN: 1118030354
Category : Business & Economics
Languages : en
Pages : 612
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Book Description
The most up-to-date guide on making the right capital restructuring moves The Art of Capital Restructuring provides a fresh look at the current state of mergers, acquisitions, and corporate restructuring around the world. The dynamic nature of M&As requires an evolving understanding of the field, and this book considers several different forms of physical restructuring such as divestitures as well as financial restructuring, which refers to alterations in the capital structure of the firm. The Art of Capital Restructuring not only explains the financial aspects of these transactions but also examines legal, regulatory, tax, ethical, social, and behavioral considerations. In addition to this timely information, coverage also includes discussion of basic concepts, motives, strategies, and techniques as well as their application to increasingly complex, real-world situations. Emphasizes best practices that lead to M&A success Contains important and relevant research studies based on recent developments in the field Comprised of contributed chapters from both experienced professionals and academics, offering a variety of perspectives and a rich interplay of ideas Skillfully blending theory with practice, this book will put you in a better position to make the right decisions with regard to capital restructuring in today's dynamic business world.
Author: G. Kaufman
Publisher: Springer
ISBN: 0230117368
Category : Business & Economics
Languages : en
Pages : 275
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Book Description
This book is a collection of research papers that contribute to the understanding of ongoing developments in financial institutions and markets both in the United States and globally, including an in-depth look at topics such as universal access, cost recovery, and payment services; the transparency of global monetary policy; and the crisis of financial regulation.
Author: Umakanth Varottil
Publisher: Cambridge University Press
ISBN: 1107195276
Category : Business & Economics
Languages : en
Pages : 545
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Book Description
Comparative Takeover Regulation compares the laws relating to takeovers in leading Asian economies and relates them to broader global developments. It is ideal for educational institutions that teach corporate law, corporate governance, and mergers and acquisitions, as well as for law firms, corporate counsel and other practitioners.
Author: Nicola de Luca
Publisher: Cambridge University Press
ISBN: 110891117X
Category : Law
Languages : en
Pages : 599
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Book Description
Taking a text, cases and materials approach, de Luca's successful textbook remains the only offering for students of European company law, and has been thoroughly updated in this new edition. Chapters have been expanded to cover the latest legislation and directives on cross-border mergers, the use of digital tools, and cross-border insolvency, while figures and graphs have been introduced to help illustrate complex processes and relationships. Clearly differentiated explanatory textboxes from the first edition have been revised, and allow students to quickly identify sources such as EU legislation, official documents and excerpts from scholarly papers. The book explores a diverse range of topics, from what European company law is, to the structure of the Societas Europaea Statute, capital markets and takeover law. It continues to be an essential resource for the growing number of graduate courses in European company law, European business law, and comparative corporate law.
Author: Claire A. Hill
Publisher: Edward Elgar Publishing
ISBN: 1784711489
Category : Business & Economics
Languages : en
Pages : 497
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Book Description
Global in scope and written by leading scholars in the field, the Research Handbook on Mergers and Acquisitions is a modern-day survey of the state of M&A. Its chapters explore the history of mergers and acquisitions and also consider the theory behind the structure of modern transaction documentation. The book also address other key M&A issues, such as takeover defenses; judges and practitioners' perspectives on litigation; the appraisal remedy and other aspects of Federal and state law, as well as M&A considerations in the structure of start-ups. This Handbook will be an invaluable resource for scholars, practitioners, judges and legislators.
Author: Robert R. Bliss
Publisher: Palgrave MacMillan
ISBN:
Category : Business & Economics
Languages : en
Pages : 292
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Book Description
"...Artfully exposes the diverse roots of the crisis and explains how and why US and EU regulators failed to stop its spread." --Edward J. Kanf., Professor of Finance at Boston College.
