520 19 A Listed Company as the Target
speed of the process depends on the governing law and the applicable stock ex-
change rules. In London, the City Code requires a very tight schedule.
In market practice, the offer is more likely to be a public takeover bid when: the
target is defensive; the target has high institutional ownership; there are multiple
bidders; or the offer is an all-cash offer.^2
Absence of remedies for the acquirer. In both mergers and public takeover bids,
the large number of vendors (the target’s shareholders) means, in practice, that the
acquirer cannot have any post-closing remedies in the event that the target does
not live up to expectations. There is neither price adjustment nor indemnity.^3
Information management. For many reasons, information management plays a
major role before the acquisition of a listed company. One of them is the absence
of post-closing remedies. The most important reason is compliance. There is large,
detailed, and mandatory information regime consisting of: the mandatory disclo-
sure regime for companies whose shares have been admitted to trading on a regu-
lated market; the prohibition of insider trading and market manipulation; and the
disclosure regime applied in the context of public takeover offers.
A very large part of insider deals occur immediately before or during a bid.
This is because: a merger or takeover offer is usually launched at a premium; the
prospect of an offer can cause a major and sudden change in share price in all par-
ticipating companies; the preparation of the offer involves discussions inside the
offeror company and with various advisers; and it can involve discussions even
with the target company and many outsiders.^4
Regulation. Because of the nature of acquisitions, there cannot be a regulatory
regime covering all aspects of listed company mergers and acquisitions in the
Member States. However, a wide range of rules applies depending on the circum-
stances and types of companies involved.
The Transparency Directive requires the disclosure of major holdings. Disclo-
sure of major holdings is also required in regulated industries like banking, insur-
ance, and investment services in general. Public takeover bids are governed by the
Directive on takeover bids and implementing legislation. The Directive on market
abuse and implementing legislation play an important role. In addition, the parties
must comply with securities markets laws generally. The disclosure and confiden-
tiality regime is complemented by the principle of equivalent treatment.^5
(^2) Kohers N, Kohers G, Kohers T, Glamour, value, and the form of takeover, J Econ Bus
59(1) (2007) pp 74–87. See also ibid.
(^3) Goldberg L, Acquisition Agreements from a Business Perspective (Principal Focus: Pri-
vate Company Acquisition for Cash). In: PLI, Doing Deals 2008: Understanding the
Nuts & Bolts of Transactional Practice, Corporate Law and Practice Course Handbook
Series. New York City (2008) pp 222–223.
(^4) Davies PL, The Take-over Bidder Exemption and the Policy of Disclosure. In: Hopt KJ,
Wymeersch E, European Insider Dealing - Law and Practice. Butterworths, London
(1991) p 243, citing Hannigan B, Insider Dealing. London (1988) p 19.
(^5) Articles 19(1) and 42 of Directive 77/91/EEC (Second Company Law Directive); Article
17(1) of Directive 2004/109/EC (Transparency Directive); Article 3(1) of Directive
2004/25/EC (Directive on takeover bids).