11 Takeovers: Introduction
11.1 General Remarks, Parties
Business acquisitions can raise questions of the existence of the target firm. For
the acquiring firm, business acquisitions are among the largest investments that it
will make. Takeovers are one of the available corporate growth strategies and they
tend to be popular in periods of general economic expansions.^1 Scale-increasing
technological change is an important driver of takeover activity.^2
Business acquisitions raise virtually all legal questions discussed earlier in this
three-volume book. They are legally complicated. For example, the choice of par-
ties, the legal structure of the transaction, the acquisition process, and acquisition
funding are interrelated.
The purpose of this introductory chapter is to illustrate the high level of varia-
tion regarding the fundamental aspects of business acquisitions (the parties, acqui-
sition structures, forms of consideration, acquisition funding, acquisition proc-
esses, and acquisition contracts) and the high level of interrelation between many
fundamental questions.
About the terminology. The terms “takeover” and “acquisition” are used here
generically and interchangeably for any acquisition of corporate control or busi-
ness takeover. The terms “acquirer” (or “buyer”) and “vendor” (or “seller”) are
used generically for the two core parties of the acquisition. The vendor may thus
mean the shareholders that sell shares in the target company in a share deal, or the
target company that sells a division in an asset deal, or a company that will be
merged with another company.
Parties. One of the most important things influencing the legal framework of
the acquisition is the identity of the parties.
Potential buyers can range from private persons to privately-owned firms and
publicly-owned companies. Where the shares of a participating company are or
will be admitted to trading on a regulated market in the EU, an extensive disclo-
sure and information management regime will apply.
The vendor can be a company selling assets as part of its normal business, a
company looking for synergy effects and economics of scale, a company about to
(^1) See Betton S, Eckbo BE, Thorburn KS, Corporate Takeovers. In: Eckbo BE (ed), Hand-
book of Corporate Finance: Empirical Corporate Finance, Volume 2. North-
Hollande/Elsevier, Handbooks in Finance Series (2008), Chapter 15.
(^2) Coase R, The Nature of the Firm, Economica, New Series, Vol 4, No 16 (1937) pp 386–
- See Betton S, Eckbo BE, Thorburn KS, op cit, Chapter 15.
P. Mäntysaari, The Law of Corporate Finance: General Principles and EU Law,
DOI 10.1007/ 978-3-642-03058-1_11, © Springer-Verlag Berlin Heidelberg 2010