A Study on the Anti-Takeover Defence Strategies Used by the Corporates at the Time of Mergers & Acquisitions

Mergers and acquisitions (M&A) have become a common strategy for companies looking to grow and expand their operations. However, the potential benefits of M&A can also attract unwanted attention from potential acquirers, which can lead to hostile takeover attempts. To protect themselves from hostile takeovers, companies often implement anti-takeover defense strategies. Anti-takeover defense strategies refer to a range of defensive tactics that target companies can employ to deter or prevent hostile takeovers. These strategies can take various forms, including structural defenses, governance defenses, and financial defenses. This research paper examines anti-takeover defense strategies in mergers and acquisitions (M&A) using secondary data sources. The paper provides an overview of the various types of anti-takeover defense strategies that are commonly used by companies, including structural, governance, and financial defenses. The paper also analyzes the various anti-takeover defense strategies adopted in protecting shareholder value and limiting competition. The regulatory frameworks governing anti-takeover defense strategies in different jurisdictions are also explored, including the United States, United Kingdom, European Union, and Japan. The findings of this study indicate that the use of anti-takeover defense strategies can be effective in protecting shareholder value, but may also limit competition and potentially result in lower acquisition premiums. The paper concludes by discussing the implications of these findings for companies involved in M&A transactions, and the need to balance the protection of shareholder interests with the potential benefits of being an attractive target for acquisition. Overall, this research provides a comprehensive analysis of the complex landscape of anti-takeover defense strategies in M&A transactions, based on secondary data sources. The findings of this study contribute to the understanding of the role of anti-takeover defense strategies in M&A transactions and the considerations that must be taken into account by companies when implementing these strategies

Stock option grants to target CEOs during private merger negotiations

Unscheduled stock options to target chief executive officers (CEOs) are a nontrivial phenomenon during private merger negotiations. In 920 acquisition bids during 1999-2007, over 13% of targets grant them. These options substitute for golden parachutes and compensate target CEOs for the benefits they forfeit because of the merger. Targets granting unscheduled options are more likely to be acquired but they earn lower premiums. Consequently, deal value drops by '62 for every dollar target CEOs receive from unscheduled options. Conversely, acquirers of targets offering these awards experience higher returns. Therefore, deals involving unscheduled grants exhibit a transfer of wealth from target shareholders to bidder shareholders

Sue on Pay: Say on Pay’s Impact on Directors’ Fiduciary Duties

This Article advances a normative case for using say on pay litigation to enhance the state courts’ role in policing directors’ compensation decisions. Outrage over what many perceive to be excessive executive compensation has escalated dramatically in recent years. In 2010, such outrage prompted Congress to mandate say on pay—a nonbinding shareholder vote on executive compensation. In the wake of say on pay votes, some shareholders have brought suit against directors alleging that a negative vote indicates a breach of directors’ fiduciary duties. To date, the vast majority of courts have rejected these suits. This Article insists that such rejection represents a wasted opportunity and argues that Delaware courts should use say on pay litigation to alter how they assess board duties related to pay practices for at least three reasons. First, empirical evidence suggests that we cannot rely exclusively on say on pay to alter board behavior. Second, if Delaware and other state courts fail to respond to calls for better regulation of compensation practices, those courts risk further federal intrusion in this area, which could undermine private-ordering along with value-enhancing experimentation and innovation that can only occur at the state level. Third, say on pay votes are an ideal vehicle for increasing state courts’ role not only because courts should encourage boards to consider shareholder concerns but also because negative say on pay votes may be a critical signal that there is a defect in pay policies that needs to be addressed. Instead of being used as a tool to bypass fiduciary duty law, say on pay should serve as a springboard for reinvigorating such law as it pertains to executive compensation

The Incoherence of American Corporate Governance and the Need For Federal Standards

This Comment suggests that the U.S. Congress should expand the SEC’s mandate so that it has clear authority to implement corporate governance standards. Part I provides an overview of problems regarding how much executive pay is given, how pay is set, and how it is disclosed. It then highlights regulatory responses to those problems, including how they provide contradictory incentives and result in unpredictability and over-regulation. Part II considers the current scope of the SEC’s mandate, including courts’ and commentators’ difficulty in defining its boundaries. Part II concludes that this difficulty sometimes makes the SEC’s regulatory actions either ineffective or beyond its mandate. Part III looks at the SEC’s recently enacted executive compensation rules and concludes that as a result of the SEC’s mandate, the rules will not fix the problems set out in Part I. Last, Part IV argues that the U.S. Congress must expand the SEC’s mandate to enable the SEC to set federal corporate governance standards, and to allow it to effectively regulate executive compensation

CEO replacement under private information

We study a model of “information-based entrenchment” in which the CEO has private information that the board needs to make an efficient replacement decision. Eliciting the CEO’s private information is costly, as it implies that the board must pay the CEO both higher severance pay and higher on-the-job pay. While higher CEO pay is associated with higher turnover in our model, there is too little turnover in equilibrium. Our model makes novel empirical predictions relating CEO turnover, severance pay, and on-the-job pay to firm-level attributes such as size, corporate governance, and the quality of the firm’s accounting system

Clawbacks: Prospective Contract Measures in an Era of Excessive Executive Compensation and Ponzi Schemes

In the spring of 2009, public outcry erupted over the multi-million dollar bonuses paid to AIG executives even as the company was receiving TARP funds. Various measures were proposed in response, including a 90% retroactive tax on the bonuses, which the media described as a clawback. Separately, the term clawback was also used to refer to remedies potentially available to investors defrauded in the multi-billion dollar Ponzi scheme run by Bernard Madoff. While the media and legal commentators have used the term clawback reflexively, the concept has yet to be fully analyzed. In this article, we propose a doctrine of clawbacks that accounts for these seemingly variant usages. In the process, we distinguish between retroactive and prospective clawback provisions, and explore the implications of such provisions for contract law in general. Ultimately, we advocate writing prospective clawback terms into contracts directly, or implying them through default rules where possible, including via potential amendments to the law of securities regulation. We believe that such prospective clawbacks will result in more accountability for executive compensation, reduce inequities among investors in certain frauds, and overall have a salutary effect upon corporate governance

The Risks of Reward: The Role of Executive Compensation in Financial Crisis

This Article examines the role of unbridled executive pay in exacerbating what Keynes called the animal spirits of the market. It analyzes the ways in which theoretical bases of executive pay structures diverge from reality, and the stakes for the firm and society in skyrocketing pay practices unlinked to performance. Various regulatory efforts, including the executive pay provisions of the Dodd-Frank Act, are intended to better align pay with performance. This article discusses these provisions and analyzes them in light of behavioral economics. Curbing executive pay is vital to controlling risk and preventing economic collapse, but the dynamics of group behavior make solutions to the problem complex. This article acknowledges the complexity of interconnected financial systems, and concludes that the solution lies in a combination of removing perverse incentives in the tax system, encouraging the use of deferred compensation, and legal reform, together with increased vigilance on the part of regulators regarding the interconnectedness of our economy

Estimating Cargo Airdrop Collateral Damage Risk

The purpose of this research is to determine an appropriate method for estimating cargo airdrop collateral damage risk. Specifically, this thesis answers the question: How can mission planners accurately predict airdrop collateral damage risk? The question is answered through a literature review and a thorough examination of a data set of real world airdrop scoring data. The data were examined to determine critical factors that affect airdrop error risks as well as to determine the characteristics of airdrop error patterns. Through this research it was determined that bivariate normal distributions with parameters pairs determined by empirical data are appropriate for modeling cargo airdrop errors patterns. Collateral risk is estimated by summing numerical integrations of a fit bivariate normal distribution for each drop type across rectangular representations of drop field objects in the field of concern. Airdrop altitude and chute type are found to make a statistically significant difference in airdrop error patterns while airdrop aircraft type does not appear to have a significant effect. This research methodology is implemented in an EXCEL spreadsheet tool that can be easily used by airdrop mission planners including an extension, requested by the research sponsors, to handle bundled drops that fall in a linear spread

Incentives for CEOs to Exit

An important question for firms in dynamic industries is how to induce a CEO to reveal information that the firm should change its strategy, in particular when a strategy change might cause his own dismissal. We show that the uniquely optimal incentive scheme from this perspective consists of options, a base wage, and severance pay. Option compensation minimizes the CEO’s expected on-the-job pay from continuing with a poor strategy. Hence, a smaller severance payment is needed to induce the CEO to reveal information causing a strategy change than, e.g., under stock compensation or other forms of variable pay. The model suggests how deregulation and massive technological changes in the 1980s and 1990s may have contributed to the dramatic rise in CEO pay and turnover over the same period