Re-examining the hostile takeover
University of British Columbia
Master of Laws - LLM
The thesis purports to examine the phenomenon of hostile takeovers in the United States and Canada. The thesis starts with a review of history of takeover waves in the United States and the various theories attempting to explain the hostile takeover and customise the role of target management in this context. The author argues that the hostile takeover is a heterogeneous phenomenon. The heterogeneity of the hostile takeover demands a differential approach of regulation that encourages wealth-creating takeovers, and chills wealth-transferring takeovers. The hostile takeover may serve as a crucible to the soundness of a corporate governance structure. The thesis surveys the different approaches the courts of United States (mainly the Delaware courts) and Canada employ to tackle the issue of directors' duties in the context of hostile takeover bids. The author argues that the Delaware "Business Judgement Rule" approach is comparatively more coherent and effective in addressing the issue than the Canadian approach of proper purpose test. The author further reviews the regulatory regimes regarding takeovers in the United States and Canada. The author argues that generally both regimes have successfully fulfilled the goal of full and fair disclosure of information in hostile takeover bids, and a level playing field for acquirers and target companies. However, new regulatory development represented by the state antitakeover statutes purporting to eliminate the hostile takeover has begun to change the landscape of takeover regulation in the United States. The author argues that the elimination of hostile takeovers should be considered premature unless alternative mechanisms of corporate accountability are available. Are there any alternative schemes of corporate accountability available to replace hostile takeovers? Are there efficiencies made possible in the absence of hostile takeovers? The thesis strives to answer these questions by reviewing evidence from Japan, Germany and the United Kingdom. Two leading alternative schemes of corporate accountability - Gilson and Kraakman's independent directors and the Cadbury Report's Code of Best Practice - are also discussed. Finally, the author concludes that there are viable alternative schemes of corporate monitoring available for the United States and Canada to adopt, which may effectively render hostile takeovers obsolete as wasteful and controversial corporate monitors. There are also tangible movements toward the establishment of such alternative mechanisms in the North America. Hostile takeovers, a heterogeneous and controversial phenomenon that has enthralled academia and the business world for decades, will eventually fade into the history.
Law, Peter A. Allard School of