Articolo a cura di Alessandro Mosca
Introduction
Takeover bids emerge as complex and fascinating instruments in the financial world, influencing corporate dynamics and stock markets. These processes, characterized by bold negotiations and intricate financial interweaving, play a crucial role in the economic choreography, shaping the destiny of the involved companies.
Definition of takeover bids
A takeover bids is a public proposal made by a buyer to the public of savers with the aim of acquiring or strengthening control over a listed company. The acquirer proposes cash or shares as payment for the purchase of the target company’s shares. Characterized by a defined period, the public purchase offer allows the acquirer to buy or exchange shares for a predetermined quantity of the target company’s stocks.
American market
Takeover bids are inherently connected tools in the market, essential for addressing the agency cost problem. Specifically, they are means aimed at eliminating inefficient management from companies, thus promoting optimization of resources and more effective management of corporate entities.
The maximum separation between ownership and control occurs in widely held companies (UK/USA), where the control stake is particularly low because there are large companies issuing a significant number of shares. Therefore, the entity that manages to acquire a 5- 10% stake can control the company. This results in the concept of hostile takeovers in the USA, which occur when launched against the will of the control group.
In the US market, given this framework with low control stakes and a dynamic capital market, takeovers are regulated primarily in terms of transparency. There are rules aimed at ensuring that the procedure is carried out transparently.In the USA, the company is free to implement all defensive techniques it deems necessary to counter the offer. This includes employing poison pills, seeking a competing offer (white knight) even just to disrupt the main offer, implementing golden parachutes, and other activities to prevent the offer from succeeding. Unless a situation of objective impossibility of the offer is established.
European martket
At the European level, the majority of Public Purchase Offers are aimed at delisting, considering the context of a stronger and less developed family-oriented capitalism compared to the USA, with higher control stakes (30- 40%). In Europe, leaving control of the market solely to market rules risked compromising its role, with control packages being traded off-market and the Stock Exchange becoming aware of it only after the operation. Therefore, regulations on Public Purchase Offers have been introduced to ensure the protection of minority shareholders, equal treatment among all shareholders, contestability of listed companies, and informational transparency. These elements are reflected in various types of offers, such as mandatory total bids, which require the obligation to launch an offer for all shares if it exceeds a 30% threshold.
Conclusion
In conclusion, takeover bids, also called public purchase offers, delineate a dynamic scenario in the European financial landscape, shaping corporate transformations and providing buyers with a tool to consolidate control. These operations represent a crucial meeting point between the public of savers and the stock market, influencing the destinies of companies and shareholders. The public purchase offer, with its complexity and involved challenges, emerges as a vital aspect of the financial world, where the fate of companies intertwines with the crucial decisions of bidders and target shareholders.
References
Picco, F., Ponziani, V., Trovatore, G., & Ventoruzzo, M. (2021). Tender offers and takeover bids in Italy from 2007 to 2019. Empirical evidence and discussion points. Social Science-Research-Network. https://doi.org/10.2139/ssrn.3899754