Reciprocity in Takeovers

Reciprocity in Takeovers

Marco Becht

Series number :

Serial Number: 
014/2003

Date posted :

October 01 2003

Last revised :

SSRN Share

Keywords

  • European takeover directive • 
  • break-through rule • 
  • reciprocity in takeovers • 
  • ownership structure • 
  • takeover defenses • 
  • voting rights • 
  • contestability of corporate control

The European Commission has proposed a Takeover Directive that aims to make the control of European corporations more contestable. The European Parliament and Germany will not adopt the Directive unless it provides for reciprocity in takeovers, limiting access to the articles of contestability to bidders that have adopted contestability themselves. Reciprocity in takeovers is not desirable.

It unduly restricts the pool of bidders and reduces the potential benefits of contestable control. Contestable control itself has benefits, but the theoretical and empirical support for neutralising the power of incumbent blockholders and boards is too weak to justify large-scale regulatory intervention. The most powerful instruments for making corporate control contestable are not available in all Member States. The Takeover Directive could put these tools on the menu throughout the European Union, allowing companies that want them to embrace them - and giving institutional investors a chance to push for the hug. The current proposals will not change much, one-way or the other. If anything, they will add another level of complexity and confusion to the prevailing systems of corporate control in Europe.

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Authors

Professor
Real name: 
Marco Becht
Fellow, Research Member, Institutional Member, Board Member
Solvay Brussels School for Economics and Management, Université libre de Bruxelles