The Divergence of U.S. and UK Takeover Regulation Essay - 1

The Divergence of U.S. and UK Takeover Regulation - Essay Example who decides the rules of takeover in both countries. Rules of takeover in the UK are the outcome of the self regulation where interests of institutional investors play an important role while on the other hand the US judicial setup holds the responsibility of takeover rules and thus, limiting the influence of shareholders over making of rules. In the UK, shareholders’ perspectives play an important role in deciding about takeover bids and thus, takeover regime is â€Å"privatized†. Easterbook and Fischel proposed limited capability of managers to defend takeovers which did not become part of practice in the US after its dismissal by the Delaware Court and takeover decisions are still based on decisions made by those who manage businesses and they are allow to undertake several types of defense actions such as the â€Å"poison pill† or shareholder rights plan to undermine bidder’s stake. These tactics are prohibited in the UK and without the consent of shar eholders managers cannot maneuver any tactic in defense. However, in the UK managers are allowed to make use of â€Å"embedded defenses† which may involve issuance of dual-class voting stock or several other ways to take action before any bidder takes an offensive position (Armour and Skeel). Takeovers do not always result in higher returns for shareholders therefore it seems more appropriate to leave the decision in case of takeover to shareholders as in the UK. However, it is noted that the number of takeovers in the US has been greater than the UK. There could be several reasons including the veto power of directors who may feel that they are not entitled to sufficient incentives from the shareholders. In the UK, bidder can lodge a protest against managers’ actions to the Takeover Panel comprising of representatives from LSE, BOE, major banks and institutional investors. There is a greater flexibility in dealing of this Panel and limited