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The Divergence of U.S. & U.K Takeover Regulations - Essay Example

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Corporate activities are run, monitored, controlled, and regulated within a clearly defined system. This system seeks to account for all the underlying interests, concerns, and…
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The Divergence of U.S. & U.K Takeover Regulations
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Takeover Regulations Corporate governance is critical to the growth, development, and success of the corporate sector. Corporate activities are run, monitored, controlled, and regulated within a clearly defined system. This system seeks to account for all the underlying interests, concerns, and issues across corporate players. One of the said activities is takeover regulation. Takeover activities allow one business to purchase or own another through a formal agreement between key stakeholders.
Takeover activities and the underlying regulation vary from one place to another. Specifically, Armour and Skeel (2007) denote that takeover regulations in the U.S and the UK are divergent. In their article, The Divergence of U.S. and UK Takeover Regulation (2007), Armour and Skeel note that takeover is the persistent bid by one company (bidder) to acquire the business of another (target), or the process by which the bidder acquires the target company. When the term regulation is incorporated into this definition, takeover regulation denotes the practice of monitoring and controlling the bidder-target interaction so that the underlying takeover deal is fair to all stakeholders involved. This process is actually regulated by legal provisions both in the U.S and the UK.
Having noted divergence in takeover regulation between the U.S and the U.K, it is important to highlight key differential areas. The key areas of divergence in the U.S and UK handling of takeover regulation is the subject matter of Armour and Skeel’s text. While in both countries the takeover process is regulated by law, there are critical variations across the applicable legal framework. In the U.S, for example, defensive tactics by managers are provided for by law. In contrast, the UK takeover system illegalizes the practice of defensive tactics in the event of a materialized takeover.
These two countries are noticeably unique in the manner in which they handle takeover regulation. UK system of takeover regulation is primarily driven by self-regulation. On the other hand, self-regulation is little, if any, in the U.S. Furthermore, the application and subsequent use of Delaware laws in the U.S provides a mechanism for litigation as far as takeover regulation is concerned. For this reason, relevant courts and lawyer activities are high in the U.S relative to takeover bids.
In the UK, courts and lawyer activities are little, if any. Arising matters, issues, and concerns regarding takeovers are dealt with by the Takeover Panel (Gaughan 88). This divergence informs the UK-based self-regulation of takeovers. However, both U.S and UK system are not always affective. Armour and Skeel (52) claim that the UK system of takeover regulation allows for the proliferation of hostile takeovers as opposed to the U.S system. However, this does not rule out the occurrence of friendly bids and takeovers.
In conclusion, shareholder engagement is critical to the takeover process. Both the U.S and UK takeover systems account for this factor differently. In so doing, the autonomy accorded to managers in the U.S do not seem to favor this prospect. In contrast, shareholder interests are less likely to be jeopardized if the UK system is followed to the latter. In this respect, as much as the two systems have more or less similar takeover market interests to serve, their functionality and actual operation is remarkably divergent.
Works Cited
Armour, John, and Skeel David. “The Divergence of U.S. and UK Takeover Regulation”. Regulation, Fall 2007.
Gaughan, Patrick. Mergers, Acquisitions, and Corporate Restructurings. New York: John Wiley & Sons, 2010. Print. Read More
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