Using Auction Theory to Inform Takeover Regulation
This paper focuses on certain mechanisms that govern the sale of corporate assets. Under Delaware law, when a potential acquirer makes a serious bid for a target, the target's Board of Directors is required to act as would "auctioneers charged with getting the best price for the stock- holders at a sale of the company." The Delaware courts' preference for auctions follows from two premises. First, a firm's managers should maximize the value of their shareholders' investment in the company. Second, auctions maximize shareholder returns. The two premises together imply that a target's board should conduct an auction when at least two firms would bid sums that are nontrivially above the target's prebid market price.
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Volume (Year): 7 (1991)
Issue (Month): 1 (Spring)
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