Takeover rules in the European Community: An economic analysis of proposed takeover guidelines and already issued disclosure rules

Abstract

As the European Community rapidly approaches 1992, and with it a further step in its process of economic and political integration, more and more areas of its life are being governed by European rules as opposed to prior national laws. One of these fields is the acquisition of economic resources by means of buying corporations via open market purchases of their shares or tender offers. Hence the European Commission has already regulated mandatory disclosures of open market purchases’ and recently proposed another regulation on tender offers.2 Because of the joint influence on the takeover process, both sets of rules have to be seen together and this paper aims to analyze their economic impact. This impact is bound to grow as European companies struggle to prepare for the competitive environment awaiting them in the integrated Common Market after 1992. Faced with the necessity of adapting themselves, companies are increasingly making use of tactics such as hostile takeovers which not long ago were spurned as excesses of the American corporate culture.3 These attitudes are changing and not only entrepreneurial individuals like Italian Carlo de Benedetti and French Rene Arnault but also large conservative companies are becoming hostile where they see the need. Even Germany, with its staid corporate atmosphere, is changing its way with Siemens, one of its most conservative corporations, making a hostile bid for the Plessey group in Great Britain.4 As hostile takeovers are relatively new to the continent, it is not surprising that only few-if any-national regulations exist. The only exception is Great Britain with the “City Code on Takeovers and Mergers,” which is not surprising as the British capital market has known takeovers for many years. Other countries, such as France and Belgium, have some regulation but no coherent regulatory framework as the one in England. Thus the proposed European regulation deserves