Equal Treatment and the Mandatory Bid Rule

Abstract

This paper revisits the long-standing debate on the efficiency of the mandatory bid rule within the context of the Takeover Directive (TOD). It reexamines the consensus on the mandatory bid rule’s operation and explains why the rule is often viewed as an expensive way of achieving a type of equality that has little relevance to investors. While the mandatory bid rule is often criticized for being inflexible and inefficient, this paper explores whether the widespread use by sophisticated market participants of contractual analogues of the mandatory bid rule, tag- along rights, in the booming private markets may suggest beneficial second-order effects of sharing rules that can somewhat limit its costs. While it is accepted that the case for company- level optionality regarding the mandatory bid rule is indeed strong, it seems unlikely that the TOD will be amended in the foreseeable future. Instead, the paper explores whether developments over the past two decades since enactment of the TOD may have provided Member States with some de facto country-level optionality, and whether some limited experimentation with the mandatory bid rule may thus be possible in the EU.

Keywords: Takeover Directive, Mandatory Bid Rule, Takeover Regulation, Private Benefits of Control, Mergers & Acquisitions, Corporate Law