The hostile takeover is a powerful tool of corporate governance. In this context, takeover defences have evolved into increasingly complex and varied corporate weapons, with the goal of protecting target companies from the threat of hostile acquisitions. Nowadays, a large set of takeover defences exists. Despite their popularity, these defences remain controversial. Advocates of such defensive devices maintain that they increase the ability of target management to extract a higher price for target shares, as well as protect implicit labour contracts and pensions of target employees. Opponents of such devices argue that resistance reduces the probability of takeover and favours managerial entrenchment. And as a result target shareholders are worse off overall. Existing empirical work has been unable to resolve this issue since the effect of defensive devices on the value of target firms is inconclusive.
Despite clear similarities between their business and legal structures, the United Kingdom and the United States have not only pursued strikingly different models of corporate takeover regulation but also in the methods by which tactics are employed to counter takeovers i.e. via defensive mechanisms. As Armour and Skeel noted, “surprisingly little attention has been paid to the very significant differences in takeover regulation between the two countries.” This two-part post will set out the different takeover defences existent in both jurisdictions as well as try to review and compare them. Check it out by clicking here.