Appraisal Rights in the US and the EU

Abstract

Appraisal rights, a protection mechanism for minority shareholders, have recently captured the attention of academics and policymakers. The rise of a new breed of hedge funds which specialize in so-called appraisal arbitrage has resulted in a spectacular increase in appraisal petitions in connection with M&A transactions in the US and has led to calls for a tighter regulation of the appraisal remedy. Despite the growing popularity of appraisal rights in the US, this protection mechanism remains underutilized by shareholders in the EU. After discussing the general framework for merger transactions in the US and the EU, the present chapter will seek to offer an examination of appraisal rights in the US and the EU. Furthermore, it will discuss how shareholders, and in particular hedge funds, exploit the appraisal remedy in order to reap profits and assess the dangers posed by this practice. Finally, the paper will seek to decipher the factors that have led to the surge of the appraisal remedy in the US and its underutilization in EU. 

Keywords: Appraisal, Hedge Funds, Arbitrage, US, EU