The Biases of an ?Unbiased? Optional Takeovers Regime: The Mandatory Bid Threshold as a Reverse Drawbridge

The role of private ordering in takeover regulation is one of the most relevant and interesting issues regarding the optimal regime for acquisitions of listed corporations. Support for more flexible rules and freedom of contract is gaining some traction among both legislatures and academics in Europe. In the European Union, the Takeover Directive (Directive 2004/25/EC) grants numerous options to both national regulators in implementing the European rules, and to individual issuers in tailoring the applicable rules in their bylaws. This flexibility was a political compromise accepted to facilitate the approval of the Directive, but it is hotly debated: is it a necessary evil that should be constrained, or a blessing that should be enhanced? The conundrum of the balance between mandatory and enabling rules touches different aspects of takeover regulation, from tender offers to defensive measures, from the treatment of control enhancing devices to directors? duties. In this contribution, we focus on private ordering in the regulation of mandatory tender offers, one of the pillars of the European approach, and an interesting one also because the debate, so far, centered primarily on contractual freedom and directors? discretion with respect to defensive measures and control enhancing devices. After a brief Introduction, in Part II we
offer a very short overview of the European rules on mandatory bids and their theoretical framework. On this basis we discuss critically, as an example of private ordering, a recent Italian reform allowing bylaws to regulate the triggers of the mandatory bid, a reform whose interest goes beyond the Italian market. We then consider, also critically, an interesting but controversial scholarly proposal to strengthen private ordering even further through an optional, default regulation of takeovers. In Part III we present an economic model to consider the possible effects of private ordering in this area, which supports the idea that a default optional regime would not be desirable. In Part IV we sketch a different proposal to reduce the costs of corporate acquisitions, which might benefit minority investors and the market for corporate control.