The delisting by M&A of venture capital-backed companies in Europe: a story of two tales

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">This study proposes a corporate control hypothesis in which equity carve-outs facilitate changes in corporate control by providing an economical means to transfer control of corporate assets to bidders who will potentially create greater value.<span style="mso-spacerun: yes;">  </span>Consistent with this hypothesis, a statistically significant 16% of the equity carve-outs in this study's sample are taken over within six years.<span style="mso-spacerun: yes;">  </span>Those equity carve-outs subsequently taken over appear to be economically different from those motivated by other reasons.<span style="mso-spacerun: yes;">  </span>Parent firms of equity carve-outs subsequently taken over display a significantly greater share price reaction to the announcement of an equity carve-out than do parent firms of equity carve-outs not subsequently taken over.<span style="mso-spacerun: yes;">  </span>For those carve-outs subsequently taken over, an important factor contributing to parent firm gains is the relative size of the carve-out IPO.<span style="mso-spacerun: yes;">  </span>There appears to be an optimal retention level of 10-50% for carve-outs motivated by the intent to facilitate a change in corporate control.<span style="mso-spacerun: yes;">   </span></span></span><strong style="mso-bidi-font-weight: normal;"></strong></span></p>

This paper examines the relation between capital markets and corporate control in France, Germany and the UK. It compares levels of takeover activity in the three countries and describes the degree to which takeovers are associated with changes in corporate control. The paper examines the influence of regulation on forms of corporate ownership and control. It compares regulation pertaining to the rights of employees, managers and shareholders in the three countries and finds that regulatory rules are related to patterns of ownership and control changes. The paper suggests that a fundamental objective of control changes is to correct managerial failure, and that takeovers are suited to the correction of particular classes of managerial failure that cannot be readily rectified by contracts. Thus, markets with low levels of takeovers may suffer from a low level of correction of managerial failure. However, by changing ownership, takeovers may give rise to an inability of owners to commit themselves to the long-term interests of managers and employees. As a consequence, financial systems with active takeover markets may be associated with inadequate investment in firm-specific assets and an unduly short-term investment horizon. There is, therefore, a tradeoff between alternative methods of correcting managerial failure. This is particularly important for European countries facing an extension of UK takeover activity to the Continent. The process is being encouraged by the European Commission which aims to harmonize regulation on a UK-style takeover code. Harmonization of regulation may have far-reaching consequences for the structure of different countries' capital markets and, in view of the tradeoff, is of uncertain merit.

Refinancing, Debt for Equity Agreements and Takeover Bids Under Spanish Law

This study examines spatial shifts across Chinese cities between 2002 and 2018 in corporate control due to mergers and acquisitions (M&As), which are important for the Chinese urban system based on the command-and-control criteria. Descriptive results indicate that the spatial reallocation of corporate control in China has been largely dominated by metropolises, provincial capitals, and urban agglomerations. Evidence of geographical dispersion of corporate control has been found from the enlarged gains or losses in some inland and lower tier cities. Regression results underline the crucial roles that are played by regional comparative advantages, corporate demography, and government intervention in the disparate positions of Chinese cities in the M&A network. Regional economic development, output efficiency, and spatial agglomeration of listed enterprises have significantly positive effects in converging or exporting corporate control for places. Moreover, cities with higher administrative levels and policy support from the state tend to experience a net gain in corporate control. We suggest that state-led policies in emerging economies should focus on the positive impacts of corporate M&As in acquiring external assets and promoting regional integration. This study will not only advance our understanding of the geography of domestic M&As in emerging economies but also provide an alternative perspective on the dynamics behind changes in city networks.

Unique factors in commercial banks' legal and regulatory environment may influence their mechanisms of corporate control. I investigate this issue in a sample of U.S. bank holding companies (BHCs) by analyzing how many underwent a change in corporate control by hostile takeover, friendly merger, management turnover by the board, or intervention by regulators. I compare the relative importance of these methods with those in nonfinancial firms. 1 relate the use of these methods to BHC board and ownership structure and performance. I find that the most important corporate control mechanism in banks is regulatory intervention, and that the primary market‐based corporate control mechanism is action by the board of directors. Overall, however, BHC boards are much less assertive than their counterparts at nonfinancial firms. I examine reasons for this.

Who Gains from Buying Bad Bidders?

In recent years there has been an increasing use of members’ schemes of arrangement to bring about a change in corporate control. This increasing use of schemes has been criticised in public quarters on the basis that unlike takeovers, schemes are not subject to the Eggleston principles and have arguably led to target shareholders receiving lower offer prices. This study provides the first large-sample empirical evidence on differences between schemes and takeovers. We find that the likelihood of the use of schemes significantly increases when target firm ownership concentration is higher and when the bidder has a lower toehold. Scheme usage is also more likely for larger targets and bidders with higher leverage. Consistent with public criticisms of schemes, we find that after controlling for self-selection premiums in schemes are significantly lower than those in takeovers.

Market Discipline, Information Processing, and Corporate Governance

Management commitment to innovation and esop stock concentration

The paper reviews and assesses our understanding of the notion of “market discipline” in corporate governance. It questions the wholesale appeal to this notion in policy discussion, which fails to provide an account of the underlying mechanisms in terms of theory and empirical analysis. Discipline that is provided by the “market” must be compared to discipline that is provided by other institutions, e.g., intermediaries acting as “delegated monitors”. The comparative assessment depends on (i) the information technology, (ii) the role of strategic interactions, and (iii) the disciplinary mechanism itself. Concerning (i), the question is whether the benefits of multiple sources of information exceed the costs. Concerning (ii), strategic interactions concern the free-rider problem in acquiring information that benefits all financiers, as well as distributive externalities involved in exploiting an information advantage to the detriment of other financiers. Concerning (iii), the question is whether investors have explicit intervention rights or whether “discipline” results from managerial acquiescence. As for the acquisition and aggregation of information in organized markets, positive welfare effects arise only if the information is put to productive use, either through improvements in real investment and managerial incentives, or through changes in corporate control. Necessary conditions for such benefits to arise are fairly restrictive, especially if the changes that occur are based on managerial acquiescence rather than the legal intervention rights of investors. The expansion of market-based managerial incentives in the nineties had little to do with these theoretical accounts. The experience of moral hazard that has accompanied this expansion, on the side of gate-keeping institutions as well as corporate management, confirms the predictions of theory about the potential for shortfalls in market discipline and the agency costs of equity finance through the open market.

This study examines the average abnormal returns, average abnormal trading volume, and reported insider trading of corporate control target firms during a period of possibly informed trading. This period begins on the unpublicized initiation date (as reported in a postannouncement date proxy statement or 14-D1) and ends on the publication date of the first Wall Street Journal story signalling an impending change in corporate control. We find that the preannouncement date average abnormal return noted by other researchers begins after the unpublicized initiation date of the transaction. We find no evidence of the preannouncement date average abnormal trading volume noted by previous researchers; instead, we find average abnormal volume beginning with the first public information regarding the transaction.

There have been dramatic changes in corporate ownership during the past ten years with mergers, acquisitions, and leveraged buyouts reaching record levels. In 1988 merger and acquisition transactions alone totaled $246.9 billion, approximately 57 percent of total business investment expenditures.

This article investigates the effects of changes in market conditions and the financial structure of domestic petroleum firms on employment and investment in offshore oil leases. Important theoretical issues include the extent to which managerial power in firms has been challenged by intervention from financial markets and institutional investors and the effects of changes in financial control on employment and inventory investment. A pooled cross-section time series data set was assembled for forty large oil companies for 1978–1989. A dynamic analysis of company employment levels and investment in offshore oil leases in the Central Gulf of Mexico reveals that falling oil prices and lower domestic oil consumption reduced spending on offshore leases. Some support was found for the agency theory's claim that lower free cash flow reduced spending on offshore leases in the late eighties. Support was also found for an executive defense strategy (Useem 1993), where petroleum company managers reduced lease spending and employment as an adaptation to changes in market fundamentals and external threats from capital markets and institutional investors.

Pennsylvania's Act 36, restricting changes in corporate control and shareholder rights, is one of the strictest takeover laws in the United States. As most investors view a free market for corporate control as a mechanism that keeps management from deviating too far from shareholder wealth-maximization, it is not surprising that some, including the California Public Employees Retirement System (CalPERS) and individual members of the United Shareholder Association (USA), are sponsoring resolutions asking Pennsylvania companies to reincorporate in other states. A shareholder presented a reincorporation proposal to the Aluminum Co. of America (Alcoa) at its May 17, 1991 meeting. CalPERS submitted a proposal (later withdrawn) to have Scott Paper reincorporate in Delaware.1 PPG Industries considered a reincorporation proposal at its meeting on April 18, 1991. Pennsylvaniaincorporated companies should expect to see an increase in such proposals in the 1990s. Further, a letter regarding the harm the new law would cause to Pennsylvania companies, signed by 42 prominent scholars, was sent to various Pennsylvania state officials, including the governor, in January 1990.2

Analysis of changes in the locations of the headquarters of the leading thousand companies in the UK, both at the regional and urban levels, reveals evidence of increasing centralization of control in the Southeast. The main elements of change are analysed to assess their relative significance in the process.