Tender Offer Defensive Tactics: A Proposal for Reform

The increasing use of tender offers as an accepted method of expanding businesses has resulted in a proliferation of creative and effective tactics that enable corporate management to defend against the takeover of the corporation. A conflict of interest arises, however, when target management must both fight the offer and satisfy its fiduciary duty of loyalty to its shareholders. This Commentary reviews and evaluates current state regulation of tender offer defensive tactics and concludes that this judicial regulation is deficient. It then discusses and rejects existing proposals advanced for curing this deficiency.

Finally, the author proposes that the state legislatures enact an amendment to the Model Business Corporations Act that would require a shareholder vote to authorize any management defensive tactics.