L'impact de l'encadrement des OPA

Depuis plusieurs années, nous discutons de l'encadrement (optimal) des OPA au Canada, en particulier celles réalisées dans un contexte inamicale. Les mesures défensives sont bien entendu au centre des discussions.

Dans ce contexte, il est intéressant de lire l'étude Do Takeover Laws Matter? Evidence from Five Decades of Hostile Takeovers on faisait récemment état dans le Harvard Law School Forum on Corporate Governance and Financial Regulation. Voici le résumé de l'étude qui compte parmi ses auteurs le Deal Professor du NYT, le Pr Steven Davidoff:

The takeover battle for Erie Railroad is legend. In 1868, Cornelius Vanderbilt, the railroad baron, began to build an undisclosed equity position in Erie. When the group controlling Erie discovered this, they quickly acted to their own advantage, issuing a substantial number of additional shares of Erie stock for Vanderbilt to purchase. One of the managers, James Fisk, purportedly said at the time that “if this printing press don’t break down, I’ll be damned if I don’t give the old hog all he wants of Erie.” The parties then arranged for their own bought judges to issue dueling injunctions prohibiting the other from taking action at Erie. The battle climaxed when Erie’s management fled to New Jersey with over $7 million in Erie’s funds. By the time the dust settled, they were still in control and Vanderbilt was out over $1 million (details from Gordon, 2004; Markham, 2002).

The Erie story is apocryphal, but informative for any attempt to measure the effect of takeover laws. Takeover laws are enacted to regulate takeover activity, and they often take the form of anti-takeover laws intended to thwart hostile takeovers. However, these laws can have the opposite effect of their intended purpose. Although they provide protection to targets, they also implicitly rule out certain defensive tactics and therefore provide protection and increased certainty for prospective hostile bidders. In the case of Erie, it is the bidder that may have benefited from more legal structure, not the target.

In our study, Do Takeover Laws Matter? Evidence from Five Decades of Hostile Takeovers, which was recently made publicly available on SSRN, we use a hand-collected dataset of 16 different takeover laws and court decisions from 1965 through 2013 to measure the variation in takeover laws and their long-term impact on hostile activity through time. We also utilize a novel hand-collected dataset of M&A hostility back to 1965. We find that the general susceptibility to a hostile takeover peaked in 1973 and has decreased substantially since 1987. As a proportion of total M&A equal-weighted volume, hostile activity peaked immediately prior to the passage of the Williams Act in 1967 at 40% and has since declined to about 5% in 2013. Although hostile activity is less common than it once was, it has certainly not disappeared.

Bertrand and Mullainathan (1999) use variation in the timing and adoption of business combination (BC) laws by states to proxy for corporate governance quality of firms incorporated in each state. Numerous studies conducted since then rely on business combination laws as a plausibly exogenous proxy for governance quality. However, the relation between these laws and actual levels of hostile takeover activity remains questionable, with Comment and Schwert (1995) concluding that the passage of business combination laws had no discernible deterrence effect on takeover rates. In contrast, by examining the full spectrum of takeover laws over a longer sample horizon we find that the passage of business combination laws was followed by a significant decline in the likelihood of firms being successfully taken over through hostile means. However, we also note that the value-weighted proportion of firms covered by these laws jumped from 0% pre-1985 to over 95% by 1990. Thus, it is unclear whether BC laws provide sufficient cross-sectional variation in coverage to comprise a valid measure of external pressures on firms’ corporate governance.

We expand on this analysis by examining the extent to which a wide array of takeover legislation and case law has influenced hostile activity levels over the past five decades. This analysis includes the Williams Act in 1968, the first generation takeover laws and their repeal, business combination laws, fair price provisions, control share acquisition statutes, control share cash-out statutes, poison pill cases and statutes, expanded constituency laws, disgorgement provisions, anti-greenmail laws, golden parachute restrictions, tin/silver parachute blessings, assumption of labor contract laws, and the Revlon, Unocal, and Blasius standards of review. By focusing on state-level variation in the takeover environment that is largely exogenous to firm-level decisions, such as adopting a classified or staggered board, we are able to more cleanly measure the true impact on hostile activity, takeover premiums, and firm value.

Our empirical results imply that while many of these cases and pieces of legislation have influenced takeover activity, many of them have done so in a way that may not have been anticipated by the original drafters. For example, a firm’s probability of being successfully taken over through hostile means increased significantly following poison pill validation by case law and state statutes. While many practitioners consider poison pills to be one of the most powerful anti-takeover devices available to incumbent management, our results suggest that this takeover defense may still provide hostile bidders with a clear roadmap for the necessary hurdles to overcome in a successful takeover battle. Our evidence suggests that this clarity appears to benefit bidders more than targets in terms of maintaining target independence in the face of a takeover battle.

We conclude the study by constructing a firm-level “Takeover Index” of takeover susceptibility from the significant legal determinants in the hostile takeover models, and examining the relation between this index and firm level economic outcomes. We find that during the 1965-1979 period, firm value is decreasing in takeover susceptibility. This era was characterized by coercive and abusive tender offers, which prompted much of the early anti-takeover legislation. In contrast, firm value is increasing in firm takeover susceptibility in the 1980s, 1990s, and 2000s. Shareholders thus appear to value the disciplinary market for corporate control, and the secular decline in hostile takeover rates in recent years may perpetuate problems of the managerial “quiet life.” To the extent that firms deploy similar defenses to thwart shareholder activism, this trend underscores the relation between takeover defenses and corporate governance.

Puisque les OPA ne sont pas uniquement tributaires de l'encadrement juridique, mais dépendent aussi de l'environnement institutionnel, la prudence est de mise avant d'importer les conclusions de l'étude au Canada. Néanmoins, l'étude fait réfléchir. Pourrions-nous en mener une similaire au Canada?

Par Stéphane Rousseau, Professeur titulaire de la Chaire en gouvernance et droit des affaires, Université de Montréal