The Proper Role of a Target’s Management in Responding to a Tender Offer

Frank H. Easterbrook & Daniel R. Fischel

Under existing federal and State law , a corporation’s managers can resist and often defeat a premium tender offer without liability to either the corporation’s shareholders or the unsuccessful tender offeror. Professors Easterbrook and Fischel argue that resistance by a corporation’s managers to premium tender offers, even if it triggers a bidding contest, ultimately decreases shareholder welfare. Shareholders would be better off, the authors claim, were such resistance all but proscribed. The authors consider, but find wanting, a number of potential criticisms of their analysis; they conclude by proposing a rule of mangerial passivity capable of controlling resistance in actual cases.

Author: international

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State law.