Mergers and Acquisitions

by Bainbridge, Stephen M.

• ISBN13: 9781599413648
• ISBN10: 1599413647
• Edition: 2nd
• Format: Paperback
• Copyright: 2008-10-29
• Publisher: West Group

Summary

This book is designed for law students taking an advanced business law course such as Mergers & Acquisitions or Corporate Finance, with a primary emphasis on corporate and securities law issues. While the text has a strong emphasis on the doctrinal issues taught in today's M&A classes, it also places significant emphasis on providing an economic analysis of the major issues in that course. The text thus offers not only with an overview of the black letter law, but also a unifying method of thinking about the subject.

Author Biography

Stephen M. Bainbridge is the William D. Warren Professor of Law at UCLA, where he teaches Business Associations, Advanced Corporation Law, Corporate Finance, Mergers and Acquisitions, and Unincorporated Business Associations. Professor Bainbridge previously taught at the University of Illinois Law School (1988-1996)

Table of Contents

Preface	p. iii
Introduction	p. 1
The Corporation	p. 2
Some Fundamental Distinctions	p. 2
Sources of Corporation Law	p. 4
State Corporate Law	p. 4
Federal Law	p. 7
The Boundary Between State and Federal Law	p. 10
Separation of Ownership and Control	p. 10
Some Key Terminology	p. 12
The Lawyer's Role	p. 13
A Preliminary Overview of Acquisition Mechanics	p. 15
The Merger	p. 16
The Sale of All or Substantially All Assets	p. 18
The Tender Offer	p. 18
Negotiated or Open Market Purchases	p. 22
The Proxy Contest	p. 23
Glossary of Takeover Terminology	p. 23
The Business Context of M & A Transactions	p. 28
Introduction	p. 28
The Principal-Agent Problem	p. 28
The Economics of Securities Markets	p. 30
Efficient Capital Markets	p. 30
Portfolio Theory	p. 34
Putting the Tools to Work: Takeover Motives and Wealth Effects	p. 38
The Urge to Merge: Various Motives for Takeovers	p. 38
Creating Value by Displacing Inefficient Managers	p. 38
Strategic Acquisitions	p. 41
Do Takeovers Create New Wealth?	p. 43
Target v. Acquirer Shareholders	p. 43
Investors v. Nonshareholder Constituencies	p. 44
The Downward Sloping Demand Curve Hypothesis	p. 47
Mergers, Asset Sales and Other Statutory Acquisitions	p. 49
The Merger	p. 49
The Sale of All or Substantially All Corporate Assets	p. 51
Choosing Between a Merger and an Asset Sale	p. 54
Triangular Transactions	p. 55
Deciding to Merge	p. 56
The Role of the Board of Directors	p. 56
The Necessity of Process Due Care when Deciding to Merge	p. 62
Disclosure of Merger Negotiations	p. 69
The Acquisition Agreement	p. 70
The Letter of Intent	p. 70
The Acquisition Agreement	p. 71
Due Diligence	p. 74
Ensuring Exclusivity	p. 76
Exclusive Merger Agreements	p. 76
Lockups	p. 85
The Appraisal Remedy	p. 86
Mechanics	p. 87
Availability of Appraisal	p. 87
Eligibility for Appraisal	p. 88
Exclusivity of Appraisal	p. 88
Valuation in Appraisal Proceedings	p. 88
Valuation Basics: The Time Value of Money and Discounting to Present Value	p. 89
Valuation Methods Based on the Present Value of Future Dividends	p. 90
The Delaware Block Method	p. 92
Weinberger and its Discounted Cash Flow Progeny	p. 94
Elements of Value Arising from the Merger	p. 97
Marketability and Minority Discounts	p. 98
De Facto Mergers	p. 100
Freeze-out Mergers, Sales of Control, and Similar Controlling Shareholder Transactions	p. 103
Identifying Controlling Shareholders	p. 104
The Background: Parent-Subsidiary Transactions	p. 105
Sales of Control	p. 108
The General Rule	p. 109
Sale to a Looter	p. 109
Sale of Office	p. 110
Usurping a Corporate Opportunity	p. 111
Building a Better Approach to Sales of Control	p. 113
Refusals to Sell	p. 114
Freeze-Out Mergers	p. 117
The Business Context: Why Freeze-Out the Minority?	p. 118
The Business Purpose Test	p. 120
Freeze-Outs and Fairness	p. 121
Freeze-Outs, Fiduciary Duties, and Appraisal	p. 123
Effect of Shareholder Ratification	p. 126
Conducting the Sale	p. 126
Proxy Contests	p. 129
Shareholder Voting: State Law	p. 129
Overview	p. 129
Notice, Quorum, and Votes Required	p. 130
Election of Directors	p. 131
Cumulative Voting	p. 131
Classified Boards	p. 133
Shareholder Inspection Rights	p. 134
Federal Regulation of Proxies	p. 137
Origins	p. 137
The Regulatory Framework	p. 138
What is a Solicitation of Proxies?	p. 138
The Proxy Rules	p. 141
Proxy Contests	p. 145
Reimbursement of Expenses	p. 145
Shareholder Apathy and Related Problems	p. 146
The Proxy Contest's (Slight) Resurgence	p. 147
Proxy Litigation	p. 148
The Implied Private Right of Action	p. 148
Key Elements of the Proxy Cause of Action	p. 152
Tender Offers	p. 158
The Forms of Nonstatutory Acquisitions	p. 158
Share Purchases v. Tender Offers	p. 158
Tender Offers v. Proxy Contests	p. 159
A Brief History of Federal Regulation of Tender Offers	p. 161
Beachhead Acquisitions	p. 162
The Obligation to Disclose	p. 162
The Content of a Schedule 13d Disclosure Statement	p. 165
Section 13(d) Litigation	p. 166
Tender Offer Disclosure and Procedural Rules	p. 169
Definition of Tender Offer	p. 170
Commencement of a Tender Offer	p. 172
Content of Required Disclosure	p. 173
Procedural Rules	p. 176
Target Obligations	p. 176
Tender Offer Litigation	p. 179
Insider Trading and Tender Offers	p. 184
Rule 14e-3	p. 186
Misappropriation	p. 187
Origins	p. 187
O'Hagan and Bryan: The Misappropriation Theory is Called into Question	p. 189
O'Hagan	p. 190
Target Defenses Against Hostile Takeover Bids	p. 192
Takeover Defenses: The Arsenal	p. 192
Shark Repellents	p. 192
Classified Boards	p. 192
Supermajority Vote Requirements	p. 194
The Fair Price Variant	p. 195
Supermajority and Fair Price Provisions in Action	p. 195
Poison Pills	p. 196
First Generation Pills	p. 196
Second Generation Pills	p. 198
Redemption Provisions	p. 199
Variants on the Second Generation Pill	p. 200
The Third Generation: Dead Hand and No Hand Pills	p. 201
Dual Class Stock	p. 202
Other Defenses	p. 205
Pre-offer Planning	p. 205
Early Warning Systems	p. 206
Defensive Acquisitions	p. 206
Stock Repurchases	p. 206
Lock-ups	p. 207
Takeover Defenses and the Target Board's Fiduciary Duties	p. 208
Cheff v. Mathes: Delaware's First Try	p. 209
Unocal	p. 211
Revlon	p. 214
Evolution: The Pivotal Paramount Cases	p. 216
Unitrin	p. 234
Unocal and Poison Pills	p. 234
Unocal and Deal Protection Devices	p. 237
Unocal and Shareholder Disenfranchisement	p. 241
Consideration of Nonshareholder Constituency Interests	p. 242
Delaware Case Law	p. 243
A Note on the ALI Principles' Approach	p. 245
Nonshareholder Constituency Statutes	p. 245
State Anti-Takeover Legislation	p. 252
The First Generation and MITE	p. 252
Preemption Standards	p. 252
Did the Williams Act Preempt the IBTA?	p. 253
The Second Generation and CTS	p. 256
The Second Generation Statutes	p. 256
Powell's CTS Opinion	p. 258
Interpreting CTS	p. 260
A Meaningful Opportunity for Success	p. 260
Amanda Acquisition	p. 262
Commerce Clause Issues	p. 263
The Third Generation	p. 264
Table of Cases	p. 271
Index	p. 279
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