A Hostile World (Again)

In the 1980s, they became all the rage: hostile takeovers. Boards lived in fear of “corporate raiders” like Carl Icahn. For example, in 1988, there were no less than 160 unsolicited takeover bids for U.S. companies. The hostile takeover became the defining symbol of U.S. style capitalism, encapsulated in the 1987 movie classic “Wall Street”.

However, after the late 1980s unsolicited takeover bids decreased in number and over the last decade became relatively rare. For example, last year, there were less than 15 hostile takeover offers for U.S. companies. The reasons for this development are manifold. One reason is the board-friendly case law on takeover defenses—particularly the decisions of the Delaware courts in the Airgas case, which upheld a target company’s poison pill even though the bidder’s tender offer had been pending for a year. Antitrust is another, which makes it more difficult for companies with large market shares to acquire competitors without some level of cooperation from the target company. Yet, among them all, one reason in particular stands out: the previous 11-year bull market in the U.S., which until March of this year drove the share prices of public companies every upward, making potential target companies too expensive for their competitors.

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