Hostile Takeover Research Articles

Kraft's acquisition of Cadbury: Was it an amicable transatlantic merger or a hostile takeover?

This case‐based research evaluates and discusses Kraft's 2009–2010 acquisition of the UK‐based Cadbury, which turned into a bitter fight and a hostile takeover. As both firms have a rich history and distinct brand identities, the merger came to the attention of the global media and public on both sides of the Atlantic. Drawing on the merger's lengthy negotiations and the two companies' distinctive corporate cultures, this article analyzes the merger and its chaotic negotiations and developments. The merger was opposed in the United Kingdom because of Kraft's harsh approach of targeting an iconic British brand that had been in business for over 150 years. Eventually, both companies did compromise in an amicable manner and concluded a friendly tie‐up. The postmerger period reveals that Kraft's acquisition was a part of its future reorganization and expansion in global markets. This case‐based research also provides academic and practical implications for international business managers as well as multinational corporations.

Don’t freak out, Europe, but you might be in the middle of a mustelid uprising

A belligerent badger It used to be that the scariest thing Scottish castle ruins had to contend with was a little haunting here and there. But now a very real terror has emerged from the animal kingdom: badgers. Last month, a badger temporarily overtook the cellar tunnel of Craignethan Castle, about 30 km south of Glasgow. On the evening of April 12, the badger dug through loose soil into the stonework of the 16th-century castle and attempted to make itself at home, a spokesperson for Historic Environment Scotland tells Newscripts. The Scottish organization cares for more than 300 historic properties in the country. The following morning, castle staff tweeted that the tunnel was closed to the public “due to the presence of a very angry badger.” The staff surmises that the hostile takeover was unintentional, which is a little disheartening for the Newscripts gang and its wild imagination. The badger

THE POISON PILL IN JAPAN: THE MISSING INFRASTRUCTURE

The coming of hostile takeovers to Japan has been anticipated, and anticipated, and anticipated. Each report of a reduction in the size of crossholdings among Japanese companies and in the size of Japanese bank stockholdings in their clients has given rise to an expectation that now, at last, hostile offers would emerge. It is not surprising that commentators looked forward, optimistically, to the arrival of a potentially disruptive takeover technique. The extended Japanese recession, together with management resistance to internally implemented restructurings and the barriers to externally imposed restructurings, has created the potential for substantial private and social gain from rationalizing production. Nonetheless, in Japan the much anticipated hostile takeovers did not materialize. In turn, the absence of takeovers resulted in little clamor for defensive tactics; without a threat on the horizon, no demand for protection developed. A number of events now suggest that the long wait for hostile transactions in Japan may be approaching its end. The combination of crossholdings, bank holdings and governmental stasis that has frozen Japanese corporate governance leaves hostile takeovers as one of the few external mechanisms for systemic change that existing institutions do not block or at least greatly impede. Most important, the institutional infrastructure that ultimately reduced the defensive impact of the poison pill in the United States does not now exist in Japan. Thus, the poison pill has the potential to be greatly more pernicious in Japan than it has been in the United States, both because of the absence of ameliorating institutions in Japan, and because the impact is likely to be greater because in Japan the forces for change in industrial organization outside the market for corporate control are significantly less strong than in the U.S.

Corporate Governance Changes as a Signal: Contextualizing the Performance Link

Promoting “good” corporate governance has become an important concern. One result has been the creation of indexes that purport to measure the quality of a firm’s corporate governance structure. Prior scholarship reports a positive relationship between firms with good corporate governance index ratings and stock-price-based measures of a firm’s ability to create share value, such as Tobin’s Q. Little work, however, explores why we observe this relationship.We hypothesize one reason for the relationship is that a rating-altering change in corporate governance structure can be a signal concerning the quality of a firm’s management. Changes in governance structures that result in better ratings tend to make a firm’s management more vulnerable to a hostile takeover, or give independent directors or activist shareholders more voice. These effects impose lower costs on high quality managers, who have less to fear, than on poor quality ones. The willingness of a firm’s managers to make such a change thus signals that they are high quality. This positive signal leads to a share price improvement and hence a higher Tobin’s Q.Our hypothesis suggests that this signal would be particularly strong in a period where there was unusually high uncertainty about the quality of firm managers. We focus on 2001-2002, a period of an unprecedented cascade of corporate accounting scandals, including Enron and WorldCom. This led to reduced confidence in the accounting of all the other firms in the market. Using a fixed effect regression technique, we compare the change in Tobin’s Q for firms that engaged in rating-altering governance changes during this 2001-2002 period with the parallel change in Q for firms making such changes in the years surrounding the accounting scandal period (1992-2000 and 2003-2006). Consistent with our hypothesis, we find that an improved governance index score in the accounting scandal years is associated with a much larger increase in Tobin’s Q than a comparably sized rating improvement occurring in the surrounding years. We empirically rule out that this finding is solely the result of one or both of the finding’s two most likely alternative explanations. One is that having a structure with a higher rating leads over time to a firm having higher quality managers, and that higher quality managers are particularly appreciated in crisis times. A second is that managers, regardless of quality, are better motivated and informed when operating under a more highly rated governance structure, and that these drivers of better performance are particularly valuable in crisis times. Using an OLS regression technique, we compare the cross-sectional relationship between the sample firms’ governance ratings and their Tobin’s Qs for 2001-2002 with the parallel relationship in the years surrounding the accounting scandal period (1992-2000 and 2003-2006). There was no significant difference between the crisis years and the ordinary ones. In other words, in contrast to firms that changed their governance structures in the 2001-2002 period, for firms that did not change, there was no difference between 2001-2002 and other times in the strength of impact on Tobin’s Q from having a good rating versus a bad one.By enhancing share price accuracy, reducing the asymmetry of information between the market and corporate insiders concerning the quality of management enhances the efficiency of the economy. Our results show how the signaling activities of private actors can help in this regard. They also suggest how sharply asymmetries about management quality can grow if regulatory and gatekeeper failures allow a substantial number of accounting frauds to develop.

An anti-takeover strategy by limitation of voting rights: A model and a numerical approach

This study develops a new trade-off view of corporate governance from an examination of rules that limit voting rights as a defensive measure against a hostile takeover attempt. The theoretical framework concerns a listed company, the capital of which is mainly detained by atomistic shareholders and the power of which is in the hands of a minority shareholders, the hard core. The latter wants to block any hostile takeover and constructs a device based on two parameters allowing it to act on the limitation of the voting rights: a threshold and a scale-down coefficient.

Trade Secrets Protection and Antitakeover Provisions

How do firms protect their human capital? We test whether firms facing an increased threat of being acquired strengthen their antitakeover provisions (ATPs) in order to bond with their employees. We use the adoption of the Inevitable Disclosure Doctrine (IDD) by US state courts, which exogenously decreases knowledge-worker mobility, thus elevating takeover risk and reducing employee incentives to innovate. Firms respond to IDD adoption by strengthening ATPs that defend against hostile takeovers, especially when they have greater ex-ante employee mobility and human capital and place greater importance on employee relations. We find no evidence that managers strengthen ATPs for entrenchment or takeover bargaining purposes in this setting. Our findings show that ATPs can be used to credibly commit to employees in order to protect long-term value creation.

The Vanke-Baoneng Case and Beyond: Hostile Takeover and Corporate Governance in China

This draft explores the takeover war between Vanke (target) and Baoneng Group (bidder) and related issues on hostile takeovers in China. The Vanke-Baoneng case (hereinafter Vanke case) has raised many questions about corporate governance, a market for corporate control, market institutions, regulatory issues, and political economy implications. The draft consists of three Parts. Part I sketches the Vanke case. Part II examines some selective corporate governance topics relating to the Vanke case and the hostile takeover regime in China. Part III summarizes the draft and concludes.

Controlling Shareholders and Corporate Governance: Complicating the Comparative Taxonomy

Corporate governance scholarship has shifted focus in recent years from hostile takeovers, which occur primarily in the held systems of the United States and the United Kingdom, to the comparative merits of the shareholder systems that are the norm most everywhere else in the world. In this emerging debate, the simple dichotomy between controlling systems and held systems that has largely dominated the discourse is too coarse to allow a deeper understanding of the diversity of ownership structures in different national capital markets and their policy implications. In this Article, Professor Ronald Gilson seeks to complicate the prevailing analysis of controlling shareholders and corporate governance by developing a more nuanced taxonomy of controlling structures and examining the implications of this view on our understanding of held and controlling systems. Development of a new taxonomy begins with recognition of the controlling tradeoff: focused monitoring in return for some private benefits of control and at a cost in speed of adaptation. Building from this tradeoff, this Article looks closely at two central features of a more complex taxonomy: the concepts of controlling shareholders and of private benefits of control. In particular, the framework highlights the value of distinguishing between efficient and inefficient controlling systems, and between pecuniary and nonpecuniary private benefits of control. Together, the two distinctions reframe the taxonomy of distribution to distinguish between regimes that support companies with a diversity of distributions and regimes that support only companies with a controlling shareholder. This Article concludes by examining potential macroeconomic effects and policy implications and calling for research under this new framework to further the debate on controlling systems. I. INTRODUCTION The big issue in corporate governance scholarship is changing. Over the last fifteen years, the academic and policy debate has focused on hostile takeovers. The terms and tenor of the debate in the United States are by now numbingly familiar. The same pattern is now observable in Europe, (1) where the tone of the debate, if not necessarily its politics, seems to have moderated a great deal. (2) As the issues surrounding hostile takeovers have clarified, attention has begun to shift from debating a phenomenon--observed largely in the United States and the United Kingdom, because only in those two jurisdictions is control of most public companies in the public float--to understanding the kind of control structure that dominates public corporations everywhere other than the United States and the United Kingdom. Put simply, public companies in the rest of the world typically have a single or group of shareholders with effective voting control, often but not invariably without corresponding equity holdings. Debate is now turning to the merits of these shareholder systems, both on their own terms and in comparison to the widely held shareholder systems of the United States and the United Kingdom. In this Article, I venture some early thoughts concerning how this inquiry might usefully be framed. The simple dichotomy between controlling systems and held systems that has largely dominated academic debate thus far seems to me much too coarse to allow a deeper understanding of the diversity of ownership structures in different national capital markets and of the policy implications of those structures. My goal here is to complicate the prevailing analysis of controlling shareholders and corporate governance by developing a more nuanced taxonomy of controlling structures, and then by examining the implications of this view on our understanding of held and controlling systems. …

CEO Incentives and Corporate Innovation

AbstractUsing scaled wealth‐performance sensitivity as my measure of Chief Executive Officer (CEO) incentives, and utilizing cross‐sectional variations in industry innovativeness, product market competition and firms’ degree of exposure to the market for corporate control for identification purposes, I find that higher long‐term incentives that stem from CEO holdings of unvested options are associated with greater subsequent corporate innovation in innovative industries, competitive product markets, and firms more exposed to the threat of hostile takeovers, that is, exactly where incentivizing innovation is a matter of necessity. I address the endogeneity concerns with systems of simultaneous equations estimated using three‐stage least squares. A possible channel for the observed relation between unvested options‐based incentives and subsequent corporate innovation is that these incentives encourage managers to undertake riskier projects to achieve long‐term economic benefits.

Neoliberalisation from the Ground Up: Insurgent Capital, Regional Struggle, and the Assetisation of Land

AbstractIn this paper we argue that “assetisation” has been a central axis through which both neoliberalisation and financialisation have encroached in the post‐Fordist era. We focus on the mobilisation of land as a financial asset in northwest England's former industrial heartlands, offering an account of how property developer the Peel Group came to dominate the land and port infrastructure of the region through aggressive debt‐led expansion and, in particular, a hostile takeover of the Manchester Ship Canal for its land‐bank. In doing so, we illustrate how the capture of resources, especially land, by private corporations has shaped both substance and process of neoliberalisation from the ground up. By focusing on transformative struggles over land we contribute to research agendas attempting to understand the systemically dispossessive nature of assetisation, its relationship to fictitious capital formation, and the way such neoliberalising transformations are produced through grounded and situated socio‐spatial struggles.

Corporate Short-Termism and Intertemporal Choice

This paper presents an intertemporal model of short-termism. Critics have portrayed short-termism in broad brushstrokes as the bane of corporate governance. This paper shows that from a financial perspective short-termism does not have a self-evident, efficiency-based normative value. It applies a well-accepted asset valuation theory to demonstrate that short-termism is not per se inefficient. Intuition suggests that if profitable enough, a short-term strategy would be better than a longterm strategy. The model demonstrates this intuition to be a mathematical and financial truth. Several generalizable observations result therefrom. The model is tested in a case study of Air Products and Chemicals, Inc. v. Airgas, Inc., the most prominent and legally significant Delaware hostile takeover battles in recent years. Short-termism was a key fact in the court’s legal analysis of the target’s poison pill defense. For unique reasons, the case enables a counterfactual analysis of the financial returns based on the target’s intertemporal strategic choices and the time horizons of shareholders. The choice of the short-term is contextual; the outcomes therefrom can result in random errors or rational outcomes. It can also result in a systemic social problem, but only when two levels of market inefficiency coexist: the corporate market is systemically biased in intertemporal decisions, and the capital market is inefficient in incorporating this bias into stock prices. These conditions are special, occurring only infrequently. They are intrinsic qualities of a market bubble. This paper precisely defines the conditions in which short-termism can become a social problem.

How has takeover competition changed over time?

We study a random sample of completed and withdrawn takeovers during the 1981 to 2014 time period to provide new evidence on the role of takeover impediments such as poison pills, staggered boards and state antitakeover devices. Do such impediments act in the interest of management by promoting entrenchment or do they act in shareholder interest by improving bargaining power during the takeover auction process? We first confirm the growing trend of takeover impediments over time in our sample. We then relate these trends to changes in the takeover auction process over time. Although we corroborate prior findings of a decline in hostile takeovers and publicly reported takeover auctions between the 1980s and later time periods, we find that takeover competition across the entire auction process between deal initiation and completion has not declined. In effect, takeover competition via auctions has gone underground. Moreover, takeover premiums have not declined over time. We interpret the results to be consistent with the shareholder interest/bargaining power hypothesis and inconsistent with the management interest/entrenchment hypothesis. Our analysis highlights the usefulness of research sources for SEC merger documents including microfiche, Lexis Nexis and Thomson One Financial that provide historical information on the takeover auction process prior to the EDGAR filings that started in the mid-1990s.

Idea wspaniałego antropocenu: wrogie przejęcie czy antropodycea?

The idea of the great Anthropocene: Hostile takeover or anthropodicy?The article discusses claims and postulates of the so-called An Ecomodernist Manifesto, signed in 2015 by such intellectuals as Ted Nordhaus, Michael Shellenberger, Ruth de Vries or David W. Keith. Ecomodernists or ecopragmatists, as they liked to be called believe in the possibility of creating the great or at least the good Anthropocene. Their theses are subsequently confronted in the text with a strong critical response articulated in A Degrowth Response to An Ecomodernist Manifesto, published in the same year. The presentation of the discussion is additionally enriched by the analysis of other arguments, invoked by such scholars as an Australian economist Clive Hamilton, an American ecosocialist Ian Angus, an Irish expert of environmental security Simon Dalby and a French sociologist and philosopher Bruno Latour. The aforementioned researchers interpret the ecomodernist idea of the good Anthropocene as un unjustified techno-optimism, as an attempt to hijack the idea of the Anthropocene, as a kind of highly controversial anthropodicy, and as groundless technological or neoliberal optimism upheld by the privileged groups in the developed world.

Takeover Defenses in the United Kingdom

The present paper provides a framework of takeover defenses in the United Kingdom and analyzes the role of takeover defenses in the UK that has implemented the EU Takeover Directive in its jurisdiction. There is an analysis of UK hostile takeovers and takeover defenses regulation, along with the case law that formulated it. There is a presentation of takeover defenses involving frustrating actions, such as restructuring defenses, target repurchases, litigation, as well as defensive actions, including strategies such as the defense document strategy, lobbying, seeking alternative bids, profit forecasts. The analysis of takeover defenses in cases of hostile takeovers in the UK market aims to enhance the understanding of their application framework and to provide further insight on the way the structure of the economy influences takeover defenses and vice-versa. It, also, intends to provide feedback for the assessment of economic processes on potential restructuring and normalization in the UK as well as the EU, especially in the light of Brexit that will likely create extensive negotiations on future policy implementation both in the UK and EU.

Discursive struggles between bidding and target companies: an analysis of press releases issued during hostile takeover bids

What are the types of interactions in the discursive struggles between the two parties involved in a hostile takeover bid? How is the legitimacy of the bid (de) constructed by both the bidding and target companies during their discursive struggles? This paper aims at addressing these research questions. Discursive struggles between the bidding and target companies are studied in a sample of 66 press releases related to seven hostile takeover bids approved by the French Market Regulator between December 2006 and December 2014. A study of the sequence followed by each party in issuing their press releases confirms the existence of strong interactions in all the hostile takeover bids studied. Using a manual content analysis methodology, we find that the disclosures made by the bidding and target companies consist of a series of attacks and defenses in which target companies are particularly offensive. We also give evidence that the two companies use legitimation, (de) legitimation and (re) legitimation arguments during discursive struggles, revealing the reciprocity of the communication between the two protagonists. We underline the symbolic or strategic dimensions of these legitimacy strategies in the view of the outcome of bids. Finally, we discuss the implications of our findings for regulators and make suggestions for future research. Based on the metaphor of ventriloquism, our research highlights the importance of considering disclosures as a dynamic and mutual influence process.

Обеспечение экономической безопасности хозяйствующего субъекта в условиях угроз враждебного поглощения: анализ внутренней рейдактивности компании

Обеспечение экономической безопасности хозяйствующего субъекта в условиях угроз враждебного поглощения: анализ внутренней рейдактивности компании

Information Effects from Hostile Takeovers

Mergers and acquisitions(M&A) are a means of achieving globalization, inorganic growth, accessing the newest technologies, and enhancing capitalization. Glueck [12] indicated M&A is a way that firm pursuit external growth. There are many studies on the abnormal re- turns and announcement effects of mergers and acquisitions, but few papers focus on hostile takeovers. This paper applies the event study method to examine hostile takeovers in the electronic industry around the world and delve into the abnormal returns of the acquirers and the targets. The data on hostile takeovers in 1981-2016 are sourced from Security Data Company (SDC). The historical share prices are obtained from DataStream. The purpose is to validate the presence of significant abnormal returns on acquirers and targets and compare the abnormal returns between the acquirers and the targets, as well as between non-electronic industry companies and electronic industry companies in hostile takeovers.

Merger and Takeover Attempts in Taiwanese Party Politics

Taiwan has experienced a number of party splits and attempted mergers since democratization. These have played a critical role in the development of the country’s party system. While a number of studies have looked at the emergence of Taiwan’s splinter parties, party mergers have not received academic attention. This study aims to systematically examine the process of party mergers and takeovers. We examine four cases of attempted mergers and takeovers. In each case, we focus the analysis around three core questions: (1) How should we best classify the actual outcomes? (2) How we can best explain the variation in outcomes? (3) How can we assess the success of merger/takeover attempts? Unlike earlier studies, we examine a variety of merger outcomes rather than just successful cases. In addition to mergers, we propose the terms negotiated takeovers and hostile takeovers. Our classification scheme is based on relative party power and the inter-party relationship. To explain the variation in outcome, we applied a framework stressing the interplay of contextual, inter-party and inner-party factors. We found key contextual variables were electoral results, relative party sizes and the electoral system. The most important inter-party variables were ideological proximity and inter-party trust following successful cooperation. Lastly, the inner-party balance of power was also critical, particularly, the strength of leaders with favorable attitudes toward the merger project. We assess the success and failure of merger/takeover attempts with reference to election results, post-merger party unity and whether the post-takeover relationship was cooperative.

Takeover Defenses in the Greek Economy

Takeover defenses are crucial factors for the success of a takeover bid. The European Commission considers takeovers a significant factor for the economic integration strategy of the EU and the Takeover Directive was issued in 2004 to regulate takeover bids.However, it is also important to consider the structural characteristics of the economy in which they operate. There is the concern that EU Member States have different market, legal and cultural structures.The present paper gives a description of takeover defenses and their application in the Greek economy; a weak economy operating in a premature non-contestable market with concentrated ownership structure. It analyzes the role of takeover defenses in Greece that has implemented the EU Takeover Directive in its jurisdiction.Subsequently, the legal framework is examined, followed by relevant case law and takeover activities related to market sectors that include banking, pharmaceutical, shipping, banking as well as privatizations.The examination of takeover defenses in hostile takeovers in the Greek market aims to promote the understanding of the operation of takeover defenses in a weak economy and to offer further understanding on the way economic growth and market structure characteristics influence takeover defenses and vice-versa.It, also, aims to provide feedback on future policy implementation in Greece and the European Union for the advancement of harmonization.

Erratum: Invading oysters and native mussels: from hostile takeover to compatible bedfellows

Erratum: Invading oysters and native mussels: from hostile takeover to compatible bedfellows