Facilitating the Optimal Mechanism in Mergers & Acquisitions: A Comparative Perspective from the Commonwealth and United States

NUS Law Working Paper No. 2020/007

[2020] 11 Indian Journal of Law and Society 107

28 Pages Posted: 4 Mar 2020 Last revised: 10 Feb 2021

See all articles by Kenneth Khoo

Kenneth Khoo

National University of Singapore (NUS) - Faculty of Law

Hans Tjio

National University of Singapore (NUS) - Faculty of Law

Date Written: March 4, 2020

Abstract

This paper attempts to identify the salient economic features of M&A transactions that are relevant to takeover regulation. While attainment of the optimal mechanism in every instance may not be possible, we have suggested general guidelines as to how takeover regulation should move towards the optimal mechanisms that are applicable given real-world assumptions. With efficiency as the appropriate normative yardstick, we suggest the removal of defensive measures, the removal of Revlon-type duties and the enforcement of ex-ante deal protection measures as simple reforms that would substantially improve a given takeover regime. This represents the state of Singapore law presently, which arguably has merged the best of the US and UK laws. The efficiency properties of the regime arise from the recognition of a "proper purpose rule". Simply put, in cases where the exercise of a power would affect the strength and relative positions within the company of different sections or classes of shareholders, we should consider whether or not the power in the hands of directors was properly exercised in accordance with welfarist standards. This balancing process is vital in takeovers where the use of "soft law" and flexible standards are administered by a market regulator, as opposed to the use of specific rules, which are better implemented by courts.

Keywords: Takeovers, Efficiency, Deal Protection, Poison Pills, Best Price, Proper Purpose

Suggested Citation

Khoo, Kenneth and Tjio, Hans, Facilitating the Optimal Mechanism in Mergers & Acquisitions: A Comparative Perspective from the Commonwealth and United States (March 4, 2020). NUS Law Working Paper No. 2020/007, [2020] 11 Indian Journal of Law and Society 107 , Available at SSRN: https://ssrn.com/abstract=3548402 or http://dx.doi.org/10.2139/ssrn.3548402

Kenneth Khoo (Contact Author)

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

Hans Tjio

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
56
Abstract Views
355
rank
426,952
PlumX Metrics