Chapter 12






            The hostile tender offer is one of the most intriguing areas of modern corporate finance.  Much of the financial press covers the latest battle between corporate raiders and their prey.[1]  Not only is the control of vast corporate treasuries at stake,[2] but also are large investment banking fees and legal fees.[3]

            This area is one that evokes a considerable amount of emotionalism, which is unusual for the business arena.[4]  Many political issues, as well as issues of economic, sociological and psychological importance, exist in large hostile takeover attempts.[5]  Entire communities, especially in locations where the target company might be a dominant industry, will usually mobilize.[6]  Complaints of all types reach regulatory authorities.[7]  Lawsuits in many different courts, both state and federal, allege various claims and counterclaims against the raider and the target company.[8]  These include claims involving antitrust laws, securities laws, state takeover laws, omissions of material information in disclosure documents or misleading disclosure releases.[9]

            Section 299.9(a) of the Federal Securities Code[10] proposes to provide a definition of a tender offer to mean an offer to buy a security, or a solicitation of an offer to sell a security, directed to more than thirty-five persons.


SECTION 14(e) OF THE SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. § 78n(e) (1988)


PIPER v. CHRIS-CRAFT INDUS., INC., 430 U.S. 1 (1977)


SEC RULE 14e-3, 17 C.F.R. § 240.14e-3 (1990)




SEC RULE 14d-10, 17 C.F.R. § 240.14d-10 (1990)


LERRO v. QUAKER OAKS CO., 84 F.3d 239 (7th Cir. 1996)


            One of the major factors in the great increase of hostile tender offers was the entrance of the large investment banking firms into the area in the 1970s.[11]  These firms had made large fees by advising their corporate clients in mergers and acquisitions during the conglomerate days of the 1960s.[12]  Such mergers and acquisitions were usually friendly, negotiated deals.[13]  The investment bankers then realized that much larger fees were available over very short periods of time in a hostile tender offer and they then became active in advising their corporate clients to proceed.[14]

            The investment banking firms can provide financing to their clients for hostile tender offers by raising funds through the sale of junk bonds.[15]

            The investment banking firms have also provided financing to recently formed shell companies by selling junk bonds or preferred stock, usually in private transactions, for use in possible hostile tender offers.[16]

            These shell companies can then proceed to acquire stock in a potential target company in secret, until acquiring 5% of the stock.[17]  Any person or group acquiring 5% or more of the equity securities of a public company must make a timely filing of a report with the SEC.[18]  At that time, the filing of a report with the Securities and Exchange Commission causes the ownership to become public information.[19]  When the filing of such a report takes place, it can cause an increase in the market activity of the stock of the company because of speculation that the company is in play.[20]  This term means that a company has attracted a potential purchaser.[21]

            When a company is in play, the possibility exists that another person, group, or raider might try to acquire the company at an even higher price.[22]  The speculators and the risk arbitrage firms will often purchase large amounts of stock based on these reports, especially if a known corporate raider has filed the SEC report.[23]  Risk arbitrage firms attempt to position themselves to make a profit on the differences in prices between the current market price of a stock and a higher price if the company is later acquired in a merger or tender offer.[24]


SEC RULE 13d-1, 17 C.F.R. § 240.13d-1 (1990)


            The corporate raider then can consider or at any time may make a hostile tender offer for a majority of the outstanding stock so as to gain control of the target company.[25]  Of course, the corporate raider can elect to acquire less than control of a target company and hold the stock for possible resale in the market or to another company who might become interested in making a higher tender offer.[26] 

            The raider might actually decide to sell the acquired stock back to the target company in a greenmail transaction.[27]  A greenmail transaction involves the purchase of all of the stock owned by a raider at a profit in order to cause the threat of a hostile takeover to go away.[28]




            Because of the presence of the hostile takeover threat to the modern public corporation, many such corporations have devised a number of defensive strategies and adopted defensive corporate measures.[29]

            Since many public corporations incorporate in Delaware, national attention has focused on the Delaware Chancery Court and the Delaware Supreme Court, especially in the decisions and opinions concerning the business judgment rule.[30]  Because of the business judgment rule, courts are reluctant to substitute their judgment for the judgment of the board of directors of a corporation concerning business matters.[31]

            In the 1970s, in response to the growing use of the hostile tender offer to take control of public corporations, many states began to enact state take-over laws.[32]  These laws appeared to corporate raiders as favoring incumbent management of locally important industries to the state and offering protection to such local corporations from unwanted hostile takeovers.[33]  As a result, much litigation has taken place over the state take-over laws.[34]  The hostile tender offer has continued through the 1980s and into the 1990s as a viable mechanism for the corporate raider.[35]  Likewise, many states have continued to show an interest in enacting such state take-over laws and litigating over them.[36]




            The area of mergers and acquisitions is very active today and has remained so for over two decades.[37]  Many corporations are continually seeking other companies for expansion purposes that they perceive as undervalued in their own business lines or even in attractive new business lines.[38]  In most corporate combinations, either by merger or acquisition, securities transfer to the shareholders of at least one of the corporations.[39]  These securities are often the common stock of the surviving corporate entity, but can also consist of preferred stock or debt instruments.[40]  It is imperative that these securities only transfer after registration with the Securities and Exchange Commission, or pursuant to an appropriate exemption from such registration.[41]


SEC RULE 145, 17 C.F.R. § 230.145 (1990)


            A significant problem has existed for a number of years in the stock market due to shell corporations.[42]  These are corporations that have no business activity and virtually no assets or liabilities.[43]  Many such shells were once viable corporations that underwent a valid public offering, but expended all of their funds in business activities, and then went out of the business.[44]  These shell corporations often trade in the stock market with very little public information available, or with substantial misinformation present because of rumors or speculation.[45]   Because of earlier problems with many of these shells, the Securities and Exchange Commission has taken steps to require that the securities distributions of any such shell corporations register with the SEC or be subject to an appropriate exemption.


SEC RULE 15c2-11, 17 C.F.R. § 240.15c2-11 (1990)


            More recently, problems have evolved around the creation of a shell corporation by the process of having a corporation go public with the sole purpose of merging with a yet unidentified company, or, in effect being a blank check or blind pool offering.[46]  These shells created by a blank check or blind pool offering then trade in the market with very little substantiated information until the corporation might publicly announce a potential merger.[47]

            In modern corporate finance transactions, including business combinations, many kinds of securities are issued.[48]  It is important that full disclosure of all corporate finance aspects of a transaction be given to shareholders in order to increase investor confidence in the securities markets.[49]

            An aspect of corporate finance for consideration and disclosure is the accounting treatment of a transaction in the financial statement of a company.[50]  Such accounting treatment on the balance sheet of a company can have an effect on the income statement so as to reflect on the reported earnings.[51]  In a merger or acquisition transaction, consideration must be given to whether the accounting treatment will be reflected as a purchase or as a pooling of interests.[52]  A purchase accounting treatment can increase the cost basis for assets and provide for a larger depreciation base.[53]  A pooling of interests accounting treatment can result in higher earnings being reported by a company if the acquired company had earnings itself.[54]

            An aspect of corporate finance that must be considered and disclosed in transactions is the income tax treatment pursuant to the Internal Revenue Code as relates to the corporation and its shareholders.[55]  Most merger or acquisition transactions are structured so that the surviving or parent corporation does not recognize any income tax gains and the shareholders can defer any income tax gains until the securities held are sold.[56]

            An aspect of corporate finance is the consideration and disclosure of the state corporation law under which the corporation operates so as to determine the authority of a company to enter into various transactions.[57]  Because a large number of publicly traded industrial corporations are incorporated in Delaware, such state has become the choice of many new incorporations each year.[58]  Consequently, the Delaware General Corporation Law is essential to understanding corporate finance transactions.[59]  This is especially necessary in the mechanics of merger and acquisition transactions.[60]  Fairness in the determination of value of the combining companies is important to the shareholders.[61]  Dissenting minority shareholders may have appraisal rights to have value determined.[62]

             The Board of Directors of a corporation who does not give proper consideration to fairness of value or shareholder rights can become subject to derivative lawsuits brought by shareholders.[63]  In such a situation, the corporation and members of the Board of Directors can also become subject to lawsuits brought by shareholders, including class actions.[64]  Today, a Board of Directors facing a decision on a business combination will likely request a fairness opinion before voting, with such fairness opinion usually rendered by an investment banking firm.[65]

            An aspect of corporate finance that must be considered and disclosed, if applicable, in tender offers as well as mergers and acquisitions is the effect of federal antitrust law on the combined entity, especially if the resulting company will be large and a dominant force in the industry.[66]  In a tender offer involving large companies, notice must be given to federal governmental authorities pursuant to antitrust law.[67]




            Many companies go public by having an initial public offering (IPO) of securities, usually common stock, sold to public investors.[68]  This normally will result in a trading market for the shares of common stock with price quotations provided by various broker-dealers who act as market makers.[69]  It also will result in the company becoming subject to various periodically required governmental disclosure filings as well as the requirement of the disclosure of any extraordinary event.[70]

            Most companies have an IPO in times of euphoric rises in the stock market.  At those times, investors are very receptive to equity ownership and such offerings will attract substantial attention.  Also, because of the prevailing attitude among investors, many of the new issues of shares of common stock will rise in price in the aftermarket.  If the company is in an industry considered glamorous or hot by the marketplace, the rise in price might be spectacular.[71]

            Of course, stock market activity will almost invariably turn downward at some point.  The result is that new issues will then cool off, especially if the drop is extreme as happened on October 27, 1987, Black Monday.[72]

            It is often at this juncture that the founders of a company may decide that the stock market has undervalued its shares, especially after a precipitous drop in market price, and the company can repurchase such shares from the public shareholders at a fraction of the initial issue price.  Thus, the result could be a going private transaction.[73]  Afterwards, the founders could own a private company much better capitalized as a result of the IPO, with a going business, and no longer subject to extensive governmental reporting requirements.[74]


SEC RULE 13e-3, 17 C.F.R. § 240.13e-3 (1990)




            A leveraged buyout (LBO) of a company is the purchase of a company by the use of extensive borrowed capital, secured by the assets of the business, with the debt paid from the earnings, and possibly partial sale of assets, of the company.[75]

            Despite the extensive media coverage of the LBO lately, such corporate financing is not a new phenomenon.[76]  Actually, for many years companies have used LBOs in the sale of corporate divisions.[77]  Often companies would be eager to dispose of subsidiaries with stodgy earnings or in unpopular industries that may reflect on the overall image or perceived image of the parent company.[78]  Such parent companies would sell the division to members of management or to other companies at a very attractive price, often assisting in arranging extensive debt financing for the sale.[79]

            Of course, the recent upsurge in LBOs and management buyouts (MBOs) has not always involved the traditional company division, but has also involved attractive private companies, and even more interestingly, public companies.[80]

            Such LBOs can utilize several different steps, including tender offers, mergers, acquisitions and going private transactions.[81]  The result of an LBO is a company owned by a few individuals or investment groups, with several layers of debt, and expecting to liquidate the debt through earnings and sale of divisions, assisted by large tax write-ups of assets and consequently much larger tax depreciation schedules than previously existed.[82]

Many of the highly leveraged corporate combinations obtain financing through junk bonds.[83]  The term junk bond means a bond that does not have a rating or has a rating of less than investment grade.[84]  A bond of this type is a speculative investment.[85]  As a result, the bond will usually have a much higher yield to attract investors.[86]


AOL/NETSCAPE, Form S-4 Registration Statement (March 2, 1998)


© 2000 Harry Stansbury




[1]  See MOIRA JOHNSTON, TAKEOVER 1-31 (1986).

[2]  See SEC, INSTITUTIONAL INVESTOR STUDY REPORT, H.R. DOC. NO. 92-64, 92d Cong., 1st Sess., at 2771-2774 (1971); MOIRA JOHNSTON, TAKEOVER 232-35 (1986); LOUIS NIZER, MY LIFE IN COURT 427‑428 (1961); 1 SHARK REPELLANTS AND GOLDEN PARACHUTES: A HANDBOOK FOR THE PRACTITIONER 3-4 (Robert H. Winter, Mark H. Stumpf & Gerard L. Hawkins eds., 1991); Arthur Fleischer, Jr. & Robert H. Mundheim, Corporate Acquisition by Tender Offer, 115 U. Pa. L. Rev. 317, 317‑38 (1967); Note, Cash Tender Offers, 83 Harv. L. Rev. 377, 377-88 (1969).

[3]  See GEORGE ANDERS, MERCHANTS OF DEBT 109-10 (1992); RICHARD M. CLURMAN, TO THE END OF TIME 236-37 (1992); Peter Petre, Merger Fees That Bend the Mind, Fortune, Jan. 20, 1986, at 18; Randall Smith, In Failed Bid for UAL, Lawyers and Bankers Didn't Fail to Get Fees, Wall St. J., Nov. 30, 1989, at A1.

[4]  See William S. Rukeyser, Getting Tough with Tenders, Fortune, Aug. 1967, at 108.

[5]  See PAUL HOFFMAN, THE DEALMAKERS 141-59 (1984); PAUL HOFFMAN, LIONS OF THE EIGHTIES 176-96 (1982); JAMES B. STEWART, THE PARTNERS 245-82 (1983); Joseph H. Flom, The Role of the Takeover in the American Economy, 32 Bus. Law. 1299, 1299-1300 (1977).

[6]  See RICHARD PHALON, THE TAKEOVER BARONS OF WALL STREET 240 (1981); James H. Fogelson, Joanne R. Wenig & Brian P. Friedman, Changing the Takeover Game: The SEC's Proposed Amendments to the Williams Act, 17 Harv. J. on Legis. 409, 410-12, 438-40, 459-63 (1980).

[7]  See HOPE LAMPERT, TILL DEATH DO US PART 67, 109-16 (1983).

[8]  See Lucien A. Bebchuck, Toward Undistorted Choice and Equal Treatment in Corporate Takeovers, 98 Harv. L. Rev. 1693, 1742-44 (1985); Ida C. Wurczinger, Note, Toward a Definition of "Tender Offer", 19 Harv. J. on Legis. 191, 191-94, 197-205, 210-12 (1982); Roundtable Discussion: Takeovers, Wall St. Transcript, Nov. 2, 1981, at 63,470.

[9]  See EDWARD R. ARANOW, HERBERT A. EINHORN & GEORGE BERLSTEIN, DEVELOPMENTS IN TENDER OFFERS FOR CORPORATE CONTROL 1‑2 (1977); EDWARD R. ARANOW & HERBERT A. EINHORN, TENDER OFFERS FOR CORPORATE CONTROL 64‑116 (1973); 1 ARTHUR FLEISCHER, JR., TENDER OFFERS: DEFENSES, RESPONSES, AND PLANNING 297-321 (1983); 1 MARTIN LIPTON & ERICA H. STEINBERGER, TAKEOVERS & FREEZEOUTS §6.06[1], at 6-121 to 6-122 (1992); J.P. MARK, THE EMPIRE BUILDERS 197-98 (1987); Herbert M. Wachtell, Special Tender Offer Litigation Tactics, 32 Bus. Law. 1433, 1433‑42 (1977); Steven Brill, Conoco, Am. Law., Nov. 1981, at 39.

[10]  FEDERAL SECURITIES CODE § 299.9(a) (1980).

[11]  See Ruthlessness By the Rules, Forbes, Feb. 1, 1976, at 24.

[12]  See Diversification's Marriage Brokers, Forbes, Feb. 15, 1967, at 38.

[13]  See JOHN BROOKS, THE GO‑GO YEARS 170-73 (1973).

[14]  See SAMUEL L. HAYES III & PHILIP M. HUBBARD, INVESTMENT BANKING: A TALE OF THREE CITIES 131-33 (1990); Connie Bruck, Kamikaze, Am. Law., Dec. 1985, at 75; Craig Forman, A Hot New Export To Europe Takes Hold: The Hostile Takeover, Wall St. J., Apr. 19, 1988, at 1.

[15]  See MOIRA JOHNSTON, TAKEOVER 145-47 (1986); Power On Wall Street, Bus. Wk., July 7, 1986, at 56; Randall Smith, How Drexel Wields Its Power in Market For High-Yield Bonds, Wall St. J., May 26, 1988, at 1.

[16]  See Roberta S. Karmel, Applying Margin Rules To Junk Bonds, N.Y. L.J., Feb. 20, 1986, at 1; James B. Stewart & Rhonda L. Rundle, Drexel Burnham Mulls A Future Threatened By Junk-Bond Curbs, Wall St. J., Dec. 13, 1985, at 1; John D. Williams, How `Junk Financings' Aid Corporate Raiders In Hostile Acquisitions, Wall St. J., Dec. 6, 1984, at 1.

[17]  See MOIRA JOHNSTON, TAKEOVER 235-36 (1986).

[18]  See KENNETH M. DAVIDSON, MEGAMERGERS 49-51 (1985).



[21]  See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN, CORPORATE FINANCE 677-79 (3d ed. 1987); THOMAS PETZINGER, JR., OIL & HONOR 125-253 (1987); James B. Stewart & Daniel Hertzberg, Investment Bankers Feed a Merger Boom And Pick Up Fat Fees, Wall St. J., Apr. 2, 1986, at 1.

[22]  See BRYAN BURROUGH & JOHN HELYER, BARBARIANS AT THE GATE 205-08 (1990); see also Ronald J. Gilson & Reinier H. Kraakman, The Mechanisms of Market Efficiency, 70 Va. L. Rev. 549, 554-88 (1984).

[23]  See MOIRA JOHNSTON, TAKEOVER 111-14 (1986).

[24]  See JOHN BROOKS, THE TAKEOVER GAME 141‑44 (1987); KENNETH M. DAVIDSON, MEGAMERGERS 32-41 (1985); RICHARD PHALON, THE TAKEOVER BARONS OF WALL STREET 125-39 (1981); Kim Masters, Arbs' Counsel Keep Sharp Eye on Battle, Legal Times of Wash., Dec. 7, 1981, at 1; Richard Vilkin, Advising Risk Arbitraguers Challenges M&A Lawyers, Legal Times of Wash., June 1, 1981, at 28.

[25]  See 1 MARTIN LIPTON & ERICA H. STEINBERGER, TAKEOVERS & FREEZEOUTS §1.06[4], at 1-40 to 1-49 (1992); William Meyers, How Ron Perelman Became The Richest Man In America, Institutional Inv., May 1989, at 140.



[28]  See Note, Preferred Greenmail: Targeted Stock Repurchases and the Management-Entrenched Hypothesis, 98 Harv. L. Rev. 1045, 1045-47 (1985).

[29]  See 1 ARTHUR FLEISCHER, JR., TENDER OFFERS: DEFENSES, RESPONSES, AND PLANNING 3-65 (1983); 1 SHARK REPELLANTS AND GOLDEN PARACHUTES: A HANDBOOK FOR THE PRACTITIONER 5-9 (Robert H. Winter, Mark H. Stumpf & Gerard L. Hawkins eds., 1991); Michael Bradley & Michael Rosenzweig, Defensive Stock Repurchases, 99 Harv. L. Rev. 1377, 1378-84 (1986); Note, Protecting Shareholders Against Partial and Two-Tiered Takeovers: The "Poison Pill", 97 Harv. L. Rev. 1964, 1964-68 (1984); see, e.g., Field v. Trump, 850 F.2d 938 (2d Cir. 1988), cert. denied, 109 S. Ct. 1122 (1989); Chromalloy Am. Corp. v. Sun Chem. Corp., 611 F.2d 240 (8th Cir. 1979); Smallwood v. Pearl Brewing Co., 489 F.2d 579 (5th Cir.), cert. denied, 419 U.S. 873 (1974); Applied Digital Data Sys. Inc. v. Milgo Elec. Corp., 425 F. Supp. 1145 (S.D.N.Y. 1977).

[30]  See ROBERT C. CLARK, CORPORATE LAW § 3.4, at 123-25 & nn.3-4 (1986); Maurice A. Hartnett, III, The History of the Delaware Court of Chancery, 48 Bus. Law. 367, 367-70 (1992); E.N. Veasey, The National Court of Excellence, 48 Bus. Law. 357, 357-58 (1992); William Meyers, Showdown In Delaware: The Battle To Shape Takeover Law, Institutional Inv., Feb. 1989, at 64.

[31]  See, e.g., R.F. Balotti & James J. Hanks, Rejudging the Business Judgment Rule, 48 Bus. Law. 1337, 1337-52 (1993); Charles Hansen, The Duty of Care, the Business Judgment Rule, and The American Law Institute Corporate Governance Project, 48 Bus. Law. 1355, 1355-74 (1993); Paul M. Bernstein, Something for Everyone In Cash Out Merger, N.Y. L.J., Mar. 22, 1983, at 1; Karen Donovan, Corporate Directors Take Beating From Del. Supreme Court, Nat'l L.J., Dec. 27, 1993/Jan. 3, 1994, at 17; James C. Freund & Rodman Ward, Jr., What's `In,' `Out' in Takeovers In Wake of Paramount v. Time, Nat'l L.J., Mar. 26, 1990, at 22; E.P. Welch & A.J. Turezyn, Courts Took Quick Action in Paramount, Nat'l L.J., Jan. 10, 1994, at 20.  See generally Curtis Hearn & Walter Baus, Director Liability and the Use of Advisory Directors, 10 La. Corp. Newsl. No. 2 (La. St. B. Ass'n Sec. on Corp. & Bus. L., New Orleans, La.), Fall 1986.

[32]  See EDWARD R. ARANOW, HERBERT A. EINHORN & GEORGE BERLSTEIN, DEVELOPMENTS IN TENDER OFFERS FOR CORPORATE CONTROL 207-57 (1977); EDWARD R. ARANOW & HERBERT A. EINHORN, TENDER OFFERS FOR CORPORATE CONTROL 153-72 (1973); Manning G. Warren III, Reflections on Dual Regulation of Securities: A Case Against Preemption, 25 B.C. L. Rev. 495, 513 & n.146 (1984).


[34]  See Donald C. Langevoort, Comment, The Supreme Court and the Politics of Corporate Takeovers: A Comment on CTS Corp. v. Dynamics Corp. of America, 101 Harv. L. Rev. 96, 97 & n.7 (1987).

[35]  See 5 LOUIS LOSS & JOEL SELIGMAN, SECURITIES REGULATION 2123-2309 (3d ed. 1990).

[36]  See Thomas L. Hazen, State Anti-Takeover Legislation: The Second and Third Generations, 23 Wake Forest L. Rev. 77, 77-88 (1988); Evelyn Sroufe & Catherine Gelband, Business Combination Statutes: A "Meaningful Opportunity" for Success?, 45 Bus. Law. 891, 891-93 (1990); Barbara Franklin, Shifting Fight To the States On Hostile Bids, Nat'l L.J., Sept. 25, 1989, at 1.

[37]  See GEORGE ANDERS, MERCHANTS OF DEBT 9 (1992); SARAH BARTLETT, THE MONEY MACHINE 42 (1991); RICHARD M. CLURMAN, TO THE END OF TIME 49-50 (1992); ROBERT LENZNER, THE GREAT GETTY 223-28 (1986); DAVID MCCLINTIC, INDECENT EXPOSURE 96‑110 (1982); RUSSELL MILLER, THE HOUSE OF GETTY 334-45 (1986); WILLIAM SHAWCROSS, MURDOCH 134-39 (1993); SYDNEY L. STERN & TED SCHOENHAUS, TOYLAND 258-60 (1990); ANDREW TOBIAS, THE FUNNY MONEY GAME 34‑37 (1971); see, e.g., Stanley H. Brown, Dr. Hammer's Magic Tingle, Fortune July 1968, at 98; Getty Oil: The House That J. Paul Built, Forbes, Mar. 1, 1974, at 30; Look Who's Playing with Toys, Forbes, Dec. 15, 1971, at 22; John McDonald, J. Paul Getty's Changed Plans, Fortune, Dec. 1967, at 108; Meshulam Riklis: The Power, the Profit and the Glory, Forbes, Mar. 15, 1971, at 24; Occidental Petroleum: Lucky Like a Fox, Forbes, June 1, 1968, at 24; Randall Smith, Merger Activity Falls for Fourth Straight Year But Some Say the Worst Is Finally Over, Wall St. J., Jan. 4, 1993, at R8; Shawn Tully, The Man Who Scored in Cola-Columbia, Fortune, Feb. 22, 1982, at 73.  See generally Arthur In Paley-Land, Forbes, May 1, 1975, at 20; Revlon After Revson, Forbes, Sept. 15, 1975, at 26; The Gilt‑Edged Profession, Forbes, Sept. 15, 1971, at 30; The Movies: Why Everyone Wants In, Forbes, Dec. 15, 1967, at 22.

[38]  See JOSEPH R. DAUGHEN & PETER BINZEN, THE WRECK OF THE PENN CENTRAL 242-51 (1971); ROY C. SMITH, THE MONEY WARS 314-17 (1990); Joann S. Lublin & Craig Forman, Europe's Merger Boom Triggers an Invasion By U.S. Deal Makers, Wall St. J., Aug. 23, 1989, at A1.

[39]  See ROY C. SMITH, THE MONEY WARS 89-90 (1990); James C. Freund & Robert L. Easton, The Three-Piece Suitor: An Alternate Approach to Negotiated Corporate Acquisitions, 34 Bus. Law. 1679, 1684-87 (1979); see also Laurie M. Grossman & Gabriella Stern, Blockbuster to Buy Controlling Stake In Spelling in Swap, Wall St. J., Mar. 9, 1993, at B10; Lawrence Rout, A Risk Arbitrgeur Plays Dangerous Game Of Betting on Mergers, Wall St. J., Feb. 22, 1979, at 1.


[41]  SEC Securities Act Release No. 5316 (Oct. 6, 1972); see Edward F. Greene & James J. Junewitz, A Reappraisal of Current Regulation of Mergers and Acquisitions, 132 U. Pa. L. Rev. 647, 649-77 (1984).

[42]  See Leib Orlanski, Going Public Through the Backdoor and the Shell Game, 58 Va. L. Rev. 1451, 1451-85 (1972).

[43]  See DAVID L. RATNER, SECURITIES REGULATION 364-71 (3d ed. 1986).


[45]  See Anthony De Toro, Market Manipulation of Penny Stocks, 17 Sec. Reg. L.J. 241, 242-43 (1989).

[46]  See Anthony De Toro, Market Manipulation of Penny Stocks, 17 Sec. Reg. L.J. 241, 242-43 & n.10 (1989).


[48]  See Louis Loss, Teaching the Regulatory Aspects of Corporate Finance, Harv. L. Sch. Bull., Dec. 1953, at 3; see also KURT EICHENWALD, SERPENT ON THE ROCK Ch.14 (1995); DIANA B. HENRIQUES, FIDELITY'S WORLD Ch. 6 (1995); G.W. MILLER, TOY WARS Ch. 3 (1998); HILARY ROSENBERG, THE VULTURE INVESTORS Ch.1 (1992).


[50]  See DETLEV F. VAGHTS, BASIC CORPORATION LAW 731-32 (2d ed. 1979).

[51]  See, e.g., What Are Earnings?  The Growing Credibility Gap, Forbes, May 15, 1967, at 28.

[52]  See DAVID R. HERWITZ, BUSINESS PLANNING 782-95 (1966); DAVID R. HERWITZ, BUSINESS PLANNING 720-33 (Temp. 2d ed. 1984).



[55]  26 U.S.C. §§ 351, 354, 357-358, 361, 368 (1986); see BORIS I. BITTKER & JAMES S. EUSTICE, FEDERAL INCOME TAXATION OF CORPORATIONS AND SHAREHOLDERS §§ 14.30-14.35, at 14-92 to 14-125 (4th ed. 1979); VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN, CORPORATE FINANCE 620-25 (3d ed. 1987).


[57]  See WILLIAM L. CARY, CORPORATIONS 10-11 (4th ed. unabridged 1969); see, e.g., Robert C. Clark, The Four Stages of Capitalism: Reflections on Investment Management Treatises, 94 Harv. L. Rev. 561, 563 & n. 5 (1981).

[58]  See WILLIAM L. CARY, CORPORATIONS 9-10 (4th ed. unabridged 1969); MOIRA JOHNSTON, TAKEOVER 261-62 (1986); LOUIS NIZER, MY LIFE IN COURT 496-523 (1961).

[59]  Del. Code Ann. tit. 8, §§ 251, 259, 261-262 (1974); see RONALD J. GILSON, THE LAW AND FINANCE OF CORPORATE ACQUISITIONS 501-57 (1987); DETLEV F. VAGHTS, BASIC CORPORATION LAW 74-75 (2d ed. 1979).

[60]  See DETLEV F. VAGHTS, BASIC CORPORATION LAW 714-15 (2d ed. 1979).

[61]  See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN, CORPORATE FINANCE 668-805 (3d ed. 1987); DETLEV F. VAGHTS, BASIC CORPORATION LAW 751-75 (2d ed. 1979); see, e. g., Paramount Communications, Inc. v. QVC Network, Inc., 637 A.2d 34 (Del. 1994); Cede & Co v. Technicolor, Inc., 634 A.2d 345 (Del. 1993); In re Tri-Star Pictures, Inc. Litigation, 634 A.2d 319 (Del. 1993); Paramount Communications, Inc. v. Time, Inc., 571 A.2d 1140 (Del. 1989); Revlon v. MacAndrews & Forbes Holdings, 506 A.2d 173 (Del. 1986); Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985); Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983); Singer v. Magnavox, 380 A.2d 969 (Del. 1977).

[62]  See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN, CORPORATE FINANCE 647-68 (3d ed. 1987); Victor Brundy & Marvin A. Chirelstein, Fair Shares in Corporate Mergers and Takeovers, 88 Harv. L. Rev. 297, 304-07 & nn. 19-20 (1974); James Vorenberg, Exclusiveness of the Dissenting Shareholder's Appraisal Right, 77 Harv. L. Rev. 1189, 1199 & nn. 35-36 (1964).

[63]  See, e.g., WILLIAM L. CARY, CORPORATIONS 868-1007 (4th ed. unabridged 1969); Victor Brudney, The Independent Director - Heavenly City or Potemkin Village?, 95 Harv. L. Rev. 597, 607-31 & nn. 50-51, 85 & 87 (1982).

[64]  See, e.g., WILLIAM L. CARY, CORPORATIONS 1008-20 (4th ed. unabridged 1969); Carol J. Loomis, A Squeeze on the Directors, Fortune, May 15, 1969, at 120.

[65]  See Robert J. Giuffra, Jr., Note, Investment Banker’s Fairness Opinions in Corporate Control Transactions, 96 Yale L.J. 119, 137-139 & n.104 (1986); see also EUGENE F. BRIGHAM & LOUIS C. GAPENSKI, FINANCIAL MANAGEMENT 233-267 (8th ed. 1997).


[66]  See, e.g., PAUL HOFFMAN, LIONS OF THE EIGHTIES 1-25 (1982); JAMES B. STEWART, THE PARTNERS 53-113 (1983).


[68]  See DAVID R. HERWITZ, BUSINESS PLANNING 200-02 (1966).



[71]  See, e.g., SEC, REPORT OF SPECIAL STUDY OF SECURITIES MARKETS, H.R. DOC. NO. 95, 88th Cong., 1st Sess., pt. 1, at 514-516 (1963); JOHN BROOKS, THE TAKEOVER GAME 67-69 (1987); KIM I. EISLER, SHARK TANK 38 (1990); MICHAEL C. JENSEN, THE FINANCIERS 24‑37 (1976); MICHAEL S. MALONE, GOING PUBLIC 16-25 (1991); STEPHEN MANES & PAUL ANDREWS, GATES 301-07 (1993); JOSEPH WECHSBERG, THE MERCHANT BANKERS 243-44 (1966); Daniel J. McCauley, Jr., The Securities Laws ‑ After 40 Years: A Need For Rethinking, 48 Notre Dame Law. 1092, 1098‑1100 (1973); John C. Boland, High-Flying Fledglings, Barron's, Dec. 13, 1982, at 8; Rhonda Brammer, Outpour of Offerings, Barron's, June 27, 1983, at 13; Sara Calian, IPOs Raise a Record $39.4 Billion for '92, Wall St. J., Jan. 4, 1993, at C1; Thomas N. Cochran, Year of the IPO, Barron's, Jan. 4, 1993, at 20; Golden Eggs?  Or Lemons?, Forbes, July 15, 1969, at 24; Arthur M. Louis, The Fastest Richest Texan Ever, Fortune, Nov. 1968, at 168; Gene C. Marcial, Ripe Young Stocks, Ready For the Picking, Bus. Wk., Dec. 30, 1991/Jan. 6, 1992, at 76.

[72]  See, e.g., JOHN BROOKS, THE GO-GO YEARS 1-14 (1973); ADAM SMITH, PAPER MONEY 271-73 (1981); Fred R. Bleakley, A Decade of Debt Is Now Giving Way To the Age of Equity, Wall St. J., Dec. 16, 1991, at A1; Laurence J. DeMaria, Stocks Plunge 508 Points, A Drop of 22.6%; 604 Million Volume Nearly Doubles Record, N.Y. Times, Oct. 20, 1987, at A1; Laurence J. DeMaria, Stocks Widely Battered Again But The Dow Rises By 102 As Biggest Issues Find Buyers, N.Y. Times, Oct. 21, 1987, at A1; Roberta S. Karmel, Black Monday, N.Y. L.J., Dec. 17, 1987, at 1; Cary Reich, Apocalypse Now?, Institutional Inv., Nov. 1987, at 79; Richard E. Rustin & George Getschow, New-Issue Stock Boom Nears a Danger Point, Some Regulators Warn, Wall St. J., Nov. 21, 1980, at 1; James B. Stewart & Daniel Hertzberg, How the Stock Market Died and Rose Again A Day After the Crash, Wall St. J., Nov. 20, 1987, at A1.

[73]  See ARTHUR M. BORDEN, GOING PRIVATE § 1.02, at 1-3 (1991); Note, Going Private, 84 Yale L.J. 903, 903-11 (1975).

[74]  See ARTHUR M. BORDEN, GOING PRIVATE § 1.07, at 1-8 to 1-14 & nn.6 & 14 (1991); Arthur M. Borden, Going Private - Old Tort, New Tort or No Tort?, 49 N.Y.U. L. Rev. 987, 987-1020 (1974).

[75]  See SARAH BARTLETT, THE MONEY MACHINE 45-47 (1991); Robert L. Frome, SEC Takes Position On Leveraged Buy-Outs, N.Y. L.J., Apr. 5, 1979, at 1; John D. Williams, King of the Buyouts, Kohlberg Kravis Helps Alter Corporate U.S., Wall St. J., Apr. 11, 1986, at 1.


[77]  See CARY REICH, FINANCIER 222-41 (1983).

[78]  See JOHN BROOKS, THE GO-GO YEARS 153-58 (1973); see also Wendy Bounds, Kodak to Sell Sterling Winthrop Drug And Two Other Units to Focus on Film, Wall St. J., May 4, 1994, at A3; William M. Bulkeley, Conglomerates Make A Surprising Comeback - With a '90s Twist, Wall St. J., Mar. 1, 1994, at A1; Christina Duff, Kmart to Sell PayLess to Firm For $1 Billion, Wall St. J., Nov. 1, 1993, at A3; Daniel Pearl & Gautam Naik, Georgia-Pacific Signs Letter of Intent To Sell Butler Paper to Alco Standard, Wall St. J., Mar. 16, 1993, at A7; Anita Sharp, Flagstar Plans to Sell Most of Canteen To Compass for $450 Million; End Loss, Wall St. J., Apr. 28, 1994, at A3.


[80]  See William T. Allen, Independent Directors In MBO Transactions: Are They Fact or Fantasy?, 45 Bus. Law. 2055, 2055-56 (1990); Carl Ferenbach, L.B.O.s: A New Capital Market (And How to Cope With It), Mergers & Acquisitions, Fall 1983, at 21.

[81]  See SARAH BARTLETT, THE MONEY MACHINE 157-69 (1991); Stephen R. Waite & Martin S. Fridson, Do Leveraged Buyouts Pose Major Credit Risks?, Mergers & Acquisitions, July-Aug. 1989, at 43.

[82]  See G.C. Hill & John D. Williams, Leveraged Purchases Of Firms Keep Gaining Despite Rising Risks, Wall St. J., Dec. 29, 1983, at 1; Allan Sloan, Luring Banks Overboard?, Forbes, April 9, 1984, at 39.

[83]  See JOHN BROOKS, THE TAKEOVER GAME 207-08 (1987); Note, Distress-Contingent Convertible Bonds: A Proposed Solution to the Excess Debt Problem, 104 Harv. L. Rev. 1857, 1857 & n.2 (1991).

[84]  See SARAH BARTLETT, THE MONEY MACHINE 253 (1991); Richard Lieb, Junk Bond Holders Face Bankruptcy Risk, N.Y. L.J., Dec. 4, 1989, at 44; Constance Mitchell, Junk Bond Issuance Posts a Strong Rebound, Partly Reflecting Late 1991 Good Performance, Wall St. J., Jan. 4, 1993, at R36; Patrick M. Reilly, Ralph Ingersoll Finds Newspapers Are Fun, Junk Bonds Are Not, Wall St. J., Mar. 26, 1990, at A1.

[85]  See Note, Distress-Contingent Convertible Bonds: A Proposed Solution to the Excess Debt Problem, 104 Harv. L. Rev. 1857, 1858 & n.8, 1866, 1877 (1991); Ford S. Worthy, The Coming Defaults in Junk Bonds, Fortune, Mar. 16, 1987, at 26.

[86]  See CONNIE BRUCK, THE PREDATOR'S BALL 27-39 (1988); JAMES B. STEWART, DEN OF THIEVES 45-47 (1991); Janet Bush & Anatole Kaletsky, When the Junk Heap Topples, Fin. Times, Feb. 14, 1990, at I26; John Liscio, The Buyout Bubble, Barron's, Oct. 31, 1988, at 6; see also Nick Gilbert, A Closer Look at First Executive, Fin. World, May 5, 1987, at 22.