Mergers, Acquisitions, and Corporate Restructurings, 6th Edition

CHAPTER THREE3

Legal Framework

THIS CHAPTER FOCUSES MAINLY on the legal regulations governing mergers and acquisitions (M&As) in the United States. However, the rules for other countries are also discussed. It will be clear that there are many similarities in the takeover regulations of various countries, although there are some important differences.

The legal requirements governing M&As in the United States differ depending on whether a transaction is a friendly merger or a hostile deal. Within each of these categories the rules vary depending on whether the transactions are cash- or stock-financed. The regulatory framework of each of these alternatives is as follows:

• Friendly merger—cash financed. The bidder is required to file a proxy statement with the Securities and Exchange Commission (SEC) that describes the deal. Usually, the bidder has to file a preliminary statement first. If the SEC makes comments, the preliminary statement may be changed before it is finalized. The finalized proxy statement is then mailed to shareholders along with a proxy card that they fill out and return. Following this, the deal has to be approved at a shareholders' meeting, whereupon the deal can then be closed.
• Friendly merger—stock financed. This process is similar to a cash-financed merger except that the securities used to purchase target shares have to be registered. The bidder does this by filing a registration statement. Once this is approved, the combined registration/proxy statement ...