A Legal and Economic Assessment of European Takeover Regulation

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Author(s): 
, , , Christophe Clerc

This CEPS paperback presents an abridged version of a study carried out by ECMI-CEPS and the law firm Marccus Partners for the European Commission and supplemented by additional policy recommendations. The study analyses the implementation of the EU Directive on takeover bids and more widely the corporate governance considerations surrounding takeover regulation from a legal and an economic perspective. The book is structured in two parts: A unique and thorough legal review, drawing on the work of a global network of law firms, which assesses the Directive and compares it with the framework prevalent in nine other major jurisdictions. And an in-depth economic study, featuring a survey of the relevant academic literature and an empirical analysis based on a comprehensive dataset on takeovers in Europe, plus a separate analysis of the impact of takeover rules on competitiveness and employment.

Takeovers are an exceptional event in the life of a corporation, fundamentally altering both control and strategy. But the prospect of becoming the target of a bid, even when remote, influences daily corporate decision-making. Takeover rules are therefore central to company law and the balance of power among managers, shareholders and stakeholders alike. To what extent is it possible to balance an active market for corporate control with long-term, firm-specific investments?

This book is an abridged version of a comprehensive study carried out by the law firm Marccus Partners and the Centre for European Policy Studies for the European Commission and supplemented by additional policy recommendations. The study analyses the corporate governance considerations driving takeover regulation. It also assesses the implementation of the EU Directive on takeover bids and compares it with the legal framework of nine other major jurisdictions, including the United States. The authors find that similar rules have different effects, depending on company-level and country-level characteristics, and examine the use of modular legislation and optional provisions to cater for these differences.

Offering the reader a unique and thorough legal review, this book draws on the work of a global network of law firms and an in-depth economic study, including a survey of the relevant academic literature and an empirical analysis based on a comprehensive dataset on takeovers in Europe dating back to the early 2000s. An analysis of the impact of takeover rules on competitiveness and employment is also provided. 

About

Directive 2004/25/EC on takeover bids sets out minimum rules for the conduct of takeover bids involving shares admitted to trading on a regulated market established in the European Union. It also seeks to provide an adequate level of protection for shareholders throughout the Union by establishing a framework of common principles and general requirements that member states must transpose by means of more detailed rules in accordance with their national systems and cultural contexts. Art. 20 of the Directive provides that five years after the transposition deadline, the European Commission shall examine the Directive “in the light of the experience acquired in applying it and, if necessary, propose its revision”. 

In the framework of this examination, the European Commission decided to appoint an external adviser to produce a study assessing the functioning of the Directive from a legal and economic perspective. The legal review was conducted by Marccus Partners under the supervision of Christophe Clerc (now managing director of the Paris office of Pinsent Masons LLP) and Fabrice Demarigny (Chairman of Marccus Partners and Head of Capital Markets at Mazars). The economic study was carried out by the European Capital Markets Institute (ECMI), within the Centre for European Policy Studies (CEPS) in Brussels, under the supervision of Diego Valiante (Coordinator and Fellow) and Mirzha de Manuel Aramendía (Research Fellow). This book is an abridged version with additional commentary to the original study prepared for the European Commission and is structured in two separate parts - a legal review and an economic analysis.