ARTICLE: Hostile Share Acquisitions and Corporate Governance: A Framework for Evaluating Antitakeover Activities

1986; 47 U. Pitt. L. Rev. 407


John H. Matheson, Jon R. Norberg



Over the past decade a wave of hostile share acquisitions has swept over American business, leaving almost no industry untouched. Whether implemented by tender offer, market purchases or private arrangements, the prize sought is corporate control. Innovative forms of financing and changes in the banking climate make it now possible for acquiring entities to raise billions of dollars in a matter of weeks. Only the mightiest and best-managed corporate giants have the ability to ride the wave without fear for their own independence.

Corporate management, concerned for their corporation’s continued independence, their shareholders’ investment interests, and their own positions has been equally innovative in developing new ways to fend off unwanted overtures. The defensive actions taken by target management, in the face of a current threat to corporate control, have a colorful assortment of names–such as the Pac-man counter offer, the sandbag, the poison pill, crown jewel warrants, golden parachutes, the scorched earth defense and greenmail payments. A corporation may also adopt prophylactic antitakeover measures, often consisting of amendments to the corporate charter. These amendments are sometimes called “shark repellents” because they are designed to ward off corporate predators prior to a hostile acquisition of shares or a tender offer.

As hostile share acquisitions have increased and numerous corporations have either responded to a takeover attempt or sought to deter consideration of such an attempt, would-be suitors and other shareholders have challenged these antitakeover measures. The analyses of most courts look primarily to the …