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Working Paper

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This paper analyzes deal protection devices, specifically termination fees and lockup agreements, that are entered into by publicly listed target companies in favor of the bidders, under Anglo-American law. U.S. (specifically Delaware) and U.K. law and regulation differ markedly in the regulation of these devices. Delaware law generally gives more leeway for the target board to enter into deal protection devices. The U.K. regime is much more shareholder-centric and severely restricts most types of deal protections. This paper examines the differences and argues that the U.K. regime is the result of the strong influence of institutional share ownership. In contrast, in U.S., institutional share ownership is of more recent origin and market participants have instead pushed for greater board independence to counteract managerial self-interest. This paper also discusses the impact of recent trends, including changing shareholder ownership patterns and regulatory developments on the concepts of independence of outside directors and their impact on the substantive rules on deal protections. It concludes that while some modest changes to the substantive rules may be required, there is insufficient evidence to justify an overhaul of the rules in either jurisdiction.


Takeovers, Deal protections, break fees


Business Organizations Law


Journal of Corporate Law Studies

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.