May 21, 2008
The Williams Act and Hostile Takeovers
Posted by Lisa Fairfax

I am attending Georgetown's conference commemorating the 40th anniversary of the Williams Act entitled "The History and Future of US and Global Takeover Regulation. . .The Williams Act 40 Years On."  Thus far it has been an extremely interesting conference and set of conversations, about which I will be posting.  One interesting conversation revolved around the future of hostile takeovers in the US.  Everyone pointed out that hostile takeovers comprise a relatively small portion of the M&A market in the US.  The consensus was that such takeovers comprised a small portion of the market because of the combination of state regulation and takeover defenses less prevalent in other markets.  However, there was disagreement about whether the low number of US hostile takeovers would persist.   Indeed, one by-product of shareholder activism is that such activism has weakened certain traditional takeover defense measures such as staggered boards and poison pills.  As one panelist noted, the apparent weakening of these measures coupled with the increased adoption of majority vote provision could create a more hospitable environment for hostile takeovers.  It is too soon to tell if this prediction will play out.  But even it it does not, it may be that even if overtly hostile transactions do not increase in the US, the reduction in defense measures could lead to increased negotiated transactions from companies seeking to avoid the (now more realistic) threat of a hostile transaction.

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