State Restrictions of Hostile Takeovers

Abstract

Hostile takeovers have been a distinctive feature of the current corporate merger boom. Initial attempts by states to regulate hostile tender offers were found to be unconstitutional. In 1987 the U.S. Supreme Court upheld for the first time a state statute restricting hostile takeovers, and by April 1988 twenty-nine states had such statutes. While the current focus is on hostile acquisitions, legislation that encourages additional bidders rather than deterring hostile bids is more likely to benefit shareholders.