The Promise of State Takeover Statutes

The purpose of this article is, first, to describe the problems associated with two-tier tender offers and the closely related, and perhaps still more coercive, partial tender offer. Second, the article will address the natural question why such offers have not already been banned, suggesting a better view of what coercion means in the context of a tender offer. Third, the article will offer a management-oriented view of coercion, explaining the legitimate interests of managers (and other groups) in resisting takeovers, as well as how greenmail and poison pills, though subject to abuse, can be used quite properly to combat coercion. Fourth, the article will describe the variety of second-generation takeover statutes and consider how they attack the problem of coercion (in most cases with unacceptable costs). Fifth, the article will demonstrate how control share statutes such as the Indiana Act largely solve these problems quite efficiently and will offer a refinement of the Indiana Act which will eliminate the unnecessary bias it has for target management in its current form. And finally, the article will consider the prospects for survival of state regulation of the market for corporate control in light of mounting pressure for new federal legislation to preempt the field.