Upsetting Deals and Reform Loop: Can Companies and M&A Law in Europe Adapt to the Market for Corporate Control?
75 Pages Posted: 23 Jul 2018 Last revised: 23 Apr 2019
Date Written: April 22, 2019
This paper sheds light on a structural problem affecting all M&A laws: deals are complex and unique, while the law is general. In particular, target companies have a particular ownership structure that must fit the paradigm contemplated by the law, which in the European Union consists almost entirely of bright-line rules. In the paper, I show that oftentimes the law does not get the ownership structure and the deal right, and dissatisfaction in the M&A market, public opinion, and local politics ensue. Legislatures typically try to fix past mistakes with new one-size-fits-all regimes that are overreactive in nature, stymie the market, and create new opportunities for regulatory arbitrage. This is not surprising: takeover regimes formed for the most part by specific bright-line rules are bound to create dissatisfaction and ultimately fail. I suggest that adaptability of the regime to the specific features of the target (its ownership structure in particular) and of the deal itself is key for better success in regulating the market for corporate control. To that end, private ordering, as well as ex post adjudication via standards, are routes that national laws should seriously contemplate if they want to escape the “reform loop” into which they put themselves.
Keywords: Takeover Law, M&A Law, Market for Corporate Control, Europe, Legal Reform, EU Law, Takeovers, Mandatory Bid Rule, Creeping Acquisitions, Defenses, Poison Pill, Rules v. Standards, Adaptability, Private Ordering, Judicial Review
JEL Classification: D21, G30, G32, G34, K22
Suggested Citation: Suggested Citation