AFMP4
Syllabus C. Acquisitions And Mergers C3. Regulatory framework and processes

C3a. Regulation of takeovers 1 / 2

Syllabus C3a)

Demonstrate an understanding of the principal factors influencing the development of the regulatory framework for mergers and acquisitions globally and, in particular, be able to compare and contrast the shareholder versus the stakeholder models of regulation.

The regulation of takeovers concentrates on controlling directors in order to ensure that all shareholders are treated fairly.

Typically, the rules will require the target company to:

  • notify its shareholders of the identity of the bidder and the terms and conditions of the bid;

  • seek independent advice;

  • not issue new shares or purchase or dispose of major assets of the company, unless agreed prior to the bid, without the agreement of a general meeting;

  • not influence or support the market price of its shares by providing finance or financial guarantees for the purchase of its own shares;

  • the company may not provide information to some shareholders which is not made available to all shareholders;

  • shareholders must be given sufficient information and time to reach a decision. No relevant information should be withheld;

  • the directors of the company should not prevent a bid succeeding without giving shareholders the opportunity to decide on the merits of the bid themselves.

Directors and managers should disregard their own personal interest when advising shareholders.