Form Over Substance? The Value of Corporate Process and Management Buy-Outs
38 Pages
Posted: 5 Aug 2010
Last revised: 15 Feb 2011
U.S. Securities and Exchange Commission
University of California, Berkeley - School of Law; University of California, Berkeley - Berkeley Center for Law, Business and the Economy
There are 2 versions of this paper
Date Written: August 4, 2010
Abstract
We examine management buy-out (MBO) transactions announced from 2003-2009 in order to study the wealth effects of MBOs and the role of process. We find that there is “value” in corporate process. MBO offer premiums are positively associated with competitive contracts and the existence of special committees. Among transactions with low initial offer premiums, bid failures are more likely when target shareholders benefit from competitive contracts. Our results allow for a cautious approach and more rigorous application of current Delaware law to provide that courts more vigorously scrutinize MBO transactions. They also inform the proper standard for review of other forms of takeovers with explicit agency/principal conflicts, including freeze-outs.
Keywords: management buy-outs, MBOs, freeze-outs, takeovers, conflict transactions, special committees, corporate process, Delaware
Suggested Citation:
Suggested Citation
Cain, Matthew D. and Davidoff Solomon, Steven, Form Over Substance? The Value of Corporate Process and Management Buy-Outs (August 4, 2010). 5th Annual Conference on Empirical Legal Studies. Available at SSRN: https://ssrn.com/abstract=1653492 or http://dx.doi.org/10.2139/ssrn.1653492
