Privately and Socially Optimal Take-Overs when Acquisition and Exclusion Strategies are Endogenous

Abstract

The case for one share/one vote regulation is quite robust to the way the takeover game is played, provided one goes all the way and allows not just toeholds or multiple bids and revisions but also bargaining. But the alternative rule that exclusion should never harm the non-voting shares, or that these shares should be taken over at the pre-bid price, will do equally well, without so severely curtailing a firm's room for security design. Under either rule, all privately beneficial takeovers are socially desirable and vice versa, and the value gains are shared fairly between the current shareholders and the bidder.