European Takeover Reform of 2012/2013 – Time to Re-Examine the Mandatory Bid

Abstract

The Thirteenth Directive on Takeover Bids of 2006 has to be revised on the basis of experience gained in the five years of its application. This revision includes an examination of the control structures and barriers to takeover bids for those bids that do not fall within the scope of application of this Directive. On the basis of an examination carried out by Marccus Partners and the Centre for European Policy Studies, the Commission published an Application Report on 26 June 2012, to which the European Parliament responded favourably in its Resolution of 21 May 2013. This has provoked highly controversial discussions in various Member States and beyond. This article carries out a comparative, theoretical and policy analysis of European takeover law, incorporating not only the Thirteenth Directive but also commonalities and differences in takeover law in the Member States as regards the European market for corporate control, with an emphasis on the mandatory bid. While many economic opinions regard the mandatory bid as a mistake (it makes takeovers more expensive), the vast majority of academics and practitioners believe that the mandatory bid as an early exit option plays an irreplaceable role in the protection of minorities, and recent economic theory holds that mandatory bids are beneficial. The objection that the economic costs of the mandatory bid could be saved through improved protection of minorities after the takeover or in groups of companies is unrealistic. There is a whole range of special reform issues regarding the mandatory bid which fall partly within the remit of the European Commission and partly within that of the national legislatures. These issues include: the control threshold; opting up and opting out; low balling and creeping in; exercising control on the basis of a voting agreement; exemptions from the mandatory bid; and share price calculation.

Note: This article is published in this Research Paper Series with the permission of the rights owner, Asser Press.

Keywords: takeover regulation, mandatory bid, reform of the 13th European Directive, Application Report of the European Commission of 2012, control threshold, options, low balling and creeping in, derogations, acting in concert.

JEL Classification: G34, G38, K22