Hostile tender offers have become a recurrent political issue. In recent years Congress has held seemingly endless hearings on the subject, and by now the testimony has settled into a familiar dialogue. Potential acquirers cast themselves as the embodiment of Adam Smith's invisible hand-their activities energize the market for corporate control with the desirable result of improving the efficiency of corporate management. Management of potential targets, in turn, claim the role of Albert Chandler's visible hand-efficient managers who internalize a function previously carried out by an inefficient market.' Their argument is that because the market for corporate control systematically understates companies' intrinsic values, managers must displace the market to prevent underpriced acquisitions. Although the terms of the debate are cast in the language of efficiency, as with most serious political issues, much of the real substance is distributional. Even those who genuinely believe that hostile takeovers improve allocative efficiency will concede that some groups still suffer in the process. Their point goes no further than the claim that, after netting out the gains (to, for example, target shareholders) and the losses (to, for example, laid-off middle management and local communities), hostile takeovers still yield a positive result. A substantial amount of the conflict in Congress, as well as within and between states, is over who reaps the gains and who bears the costs of takeovers, whatever their net social impact. 2
Ronald J. Gilson,
Drafting an Effective Greenmail Prohibition,
Colum. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/52