Guhan Subramanian

The Influence of Antitakeover Statutes on Incorporation Choice: Evidence on the "Race" Debate and Antitakeover Overreaching

Commentators have long debated whether competition among states for corporate charters represents a race to the top or a race to the bottom. Race-tothe-top advocates recently have gained ground in this debate on the basis of the general corporate migration to Delaware in the 1990s and empirical evidence suggesting that Delaware incorporation increases shareholder wealth. This Article uses second-generation state antitakeover statutes to shed additional light

Post‐Siliconix Freeze‐Outs: Theory and Evidence

At approximately the same time that the Sarbanes‐Oxley Act increased the costs associated with being a public company, important Delaware case law created a difference in the standard of judicial review for the two basic methods of freezing out minority shareholders. While a freeze‐out executed as a statutory merger is subject to stringent “entire‐fairness” review, the Delaware Chancery Court held in In re Siliconix Shareholders Litigation that a freeze‐out executed as a tender offer is not. This paper presents the first systematic empirical evidence on post‐Siliconix freeze‐outs. Using a new database of all Delaware freeze‐outs executed in the 4 years after Siliconix was decided, I find that minority shareholders achieve significantly lower abnormal returns, on average, in tender‐offer freeze‐outs relative to merger freeze‐outs. I discuss the doctrinal and policy implications of these findings in a companion paper.

The Effect of Prohibiting Deal Protection in Mergers and Acquisitions: Evidence from the United Kingdom

Since 2011, the United Kingdom has prohibited all deal protections—including termination fees—in mergers and acquisitions (M&A) deals. We examine the effect of this regulatory change on deal volumes, the incidence of competing offers, deal-jumping rates, deal premiums, and completion rates in the United Kingdom relative to the other European Group of 10 (G-10) countries. We find that M&A deal volumes in the United Kingdom declined significantly in the aftermath of the 2011 reform (in absolute terms and relative to deal volumes in other European G-10 countries). We find no countervailing benefits to targets’ shareholders in the form of higher deal premiums or more competing bids. Completion rates and deal-jumping rates also remained unchanged. Our results suggest that deal protections provide an important social welfare benefit by facilitating the initiation of M&A deals.

The Effect of Delaware Doctrine on Freezeout Structure and Outcomes: Evidence on the Unified Approach

Historically, Delaware corporate law provided different standards of judicial review for buyouts by controlling shareholders (also known as “freezeouts”) based on what transactional form was used: deferential business judgment review for freezeouts executed as tender offers, and stringent “entire fairness” review for transactions structured as mergers. Subramanian (2005), Subramanian (2007), and Restrepo (2013) provide doctrinal and empirical evidence that transactional planners responded to these differences in standards of judicial review; that these differences in judicial scrutiny created differences in outcomes for the minority shareholders; and that differences in outcomes created a social welfare loss, not just a wealth transfer from minority shareholders to the controlling shareholder. Over the past decade, in a series of important decisions, Delaware law has migrated toward a “unified approach” to freezeouts regardless of transactional form. In this paper we present empirical evidence on all freezeouts of Delaware targets during this period of doctrinal evolution. In general, we find that deal outcomes have converged in the eight years since the Delaware Chancery Court’s decision in Cox Communications, but approximately half of merger freezeouts in the post-Cox era still did not follow the procedural template provided by the unified approach. Our findings suggest that: (1) transactional planners seem to respond to even probabilistic changes in the Delaware case law; (2) the social welfare loss identified in Subramanian (2005) seems to no longer be present; but (3) the Delaware Supreme Court may nevertheless wish to “finish the job” by endorsing the unified approach, in order to ensure adequate procedural protections to minority shareholders.