Home -> Law Blog Directory -> Corporate Governance Blogs -> The Harvard Law School Corporate Governance Blog

Corporate Governance

: The Harvard Law School Corporate Governance Blog

Shareholder Pushback on Mergers and Acquisitions

By Harvard Law School Program on Corporate Governance

Our firm has recently released a new M&A Commentary providing strategic analysis of the increasingly common phenomenon of shareholder resistance to the terms of proposed acquisitions. The Commentary, entitled Shareholder Pushback on M&A Deals, explains how several high-profile mergers were rebuffed by shareholders in 2007–including Carl Icahn’s attempted purchase of Lear.

The Commentary emphasizes the importance in this environment of obtaining a positive recommendation from ISS, and of the board’s flexibility in the timing of the shareholder merger vote under Mercier v. Inter-Tel. Where those strategies fail, however, the Commentary points out that acquirers may wish to reconsider the once-dominant two-step tender approach. The Commentary concludes:

“Although the risk of shareholder pushback against announced M&A deals may be receding as the M&A market softens, it is not going away. In light of this added execution risk, parties negotiating a merger should structure the transaction to minimize it to the extent feasible. One readily available way to do this is to use a two-step transaction structure consisting of a tender offer followed by a merger, instead of a traditional one-step merger. The two-step transaction was at one time the prevailing deal structure, and it should become so again.”

The full Commentary is available online here.

Full post as published by The Harvard Law School Corporate Governance Blog on December 27, 2007 (boomark / email).