Shareholder Pushback on Mergers and Acquisitions

Our firm has recently released a new M&A Commentary providing strategic analysis of the increasingly common phenomenon of shareholder resistance to the terms of proposed acquisitions. The Commentary, entitled Shareholder Pushback on M&A Deals, explains how several high-profile mergers were rebuffed by shareholders in 2007–including Carl Icahn’s attempted purchase of Lear.

The Commentary emphasizes the importance in this environment of obtaining a positive recommendation from ISS, and of the board’s flexibility in the timing of the shareholder merger vote under Mercier v. Inter-Tel. Where those strategies fail, however, the Commentary points out that acquirers may wish to reconsider the once-dominant two-step tender approach. The Commentary concludes:

“Although the risk of shareholder pushback against announced M&A deals may be receding as the M&A market softens, it is not going away. In light of this added execution risk, parties negotiating a merger should structure the transaction to minimize it to the extent feasible. One readily available way to do this is to use a two-step transaction structure consisting of a tender offer followed by a merger, instead of a traditional one-step merger. The two-step transaction was at one time the prevailing deal structure, and it should become so again.”

The full Commentary is available online here.