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Agents Unchained: The Determinants of Takeover Defenses in IPO Firms

82 Pages Posted: 17 May 2013  

Brandon S. Gold

Schulte Roth & Zabel LLP; Harvard Law School

Date Written: May 16, 2013


Many companies continue to go public with takeover defenses even though institutional investors zealously oppose defenses in public companies. In this Article, I analyze the determinants of takeover defenses at IPO firms using an empirical analysis of 259 IPOs from 2008-12, interviews with numerous practitioners, and a survey of the corporate governance policies of significant investors. I find that the type of an issuer’s legal counsel’s M&A experience and the identity of pre-IPO shareholders explain much of the variation in takeover defenses at IPO firms. Companies advised by law firms with more target-side M&A experience adopt more defenses, while companies advised by law firms with more acquirer-side M&A experience adopt fewer defenses. Companies backed by venture capital funds are significantly more likely to adopt more takeover defenses. However, private equity backing has no effect on the pre-IPO adoption of staggered boards. Even though mutual funds and public pension funds are some of the most ardent opponents of takeover defenses in public companies, I find that issuers that they had invested in prior to the IPO almost always go public with robust takeover defenses in place. A comparison of issuers backed by Silicon Valley law firm Wilson Sonsini and New York law firm Simpson Thacher is particularly telling: Wilson Sonsini, a firm well known for its ties to the venture capital industry and its representation of targets, installed staggered boards in all of its IPO clients while Simpson Thacher, known for its private equity practice and acquirer representation, installed staggered boards in only 50% of its IPO clients. The lack of a consensus regarding the efficiency of defenses among the most experienced participants in the IPO market leads me to reject the idea that takeover defenses are generally optimal for pre-IPO shareholders.

Keywords: corporate governance, staggered boards, classified boards, IPOs, takeover defenses, anti-takeover provisions, poison pills, entrenchment, takeovers, M&A, corporate charters, corporate bylaws, private equity, venture capital, law firms

JEL Classification: D21, G23, G24, G34, G38, K22

Suggested Citation

Gold, Brandon S., Agents Unchained: The Determinants of Takeover Defenses in IPO Firms (May 16, 2013). Available at SSRN: or

Brandon S. Gold (Contact Author)

Schulte Roth & Zabel LLP ( email )

919 Third Avenue
New York, NY 10022
United States


Harvard Law School ( email )

1563 Massachusetts Ave
Cambridge, MA 02138
United States

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