THE ADVANCED GUIDE TO

SLIDE 1
MERGERS & ACQUISITIONS
DISCUSSION QUESTIONS

COURS
E
 SECTION 3
The M&A Regulatory
Environment
LECTURE 1 LECTURE 2
M&A and M&A and
State Federal
Regulations Securities Law
LECTURE
LECTURE 4
3
M&A and Other
M&A and Federal
Federal Regulations
DISCUSSION QUESTIONS

THE M&A
REGULATO
RY
 M&A REGULATIONS
M&A activity is
heavily regulated in
the U.S. at the state
and federal levels.
 M&A REGULATIONS
The M&A regulatory regime consists of the following:

State Regulations Federal


Antitakeover Laws Regulations

Securities Laws 
Securities Laws

Antitrust Laws 
Antitrust Laws

Other
DISCUSSION QUESTIONS

STATE
REGULATIO
NS
OVERVI
EW
 M&A REGULATIONS:
STATE
• State laws affecting M&A transactions
generally apply only to businesses
organized in the state.
• This complicates M&A transactions
involving multiple states and makes it
important to know the implications of
the state law that applies to a given
 M&A REGULATIONS:
STATE
• At the state level, the M&A regulatory regime consists of the following:

State Antitakeover Laws

State Securities Laws

State Antitrust Laws
 STATE
ANTITAKE
OVER
LAWS
 ANTI-TAKEOVER LAWS
• In the 1970s, in response to the
growing use of hostile Tender Offers
to take control of public companies,
many states began to enact
antitakeover laws.
• Supporters argued that such laws
protected Target shareholders and
 ANTI-TAKEOVER
STATUTES
• Anti-takeover statutes generally take
one of two forms:

Control Share Acquisition Statutes

Business Combination Statutes
• Companies incorporated in those states
may opt out of the antitakeover statutes
in their COI.
 CONTROL SHARE
ACQUISITION STATUTES
Typically provide that an Acquiror who
purchases shares of Target common
stock in excess of a specified ownership
level has no voting rights with respect
to such excess shares unless Acquiror
first obtains the approval of Target’s
non-Acquiror shareholders.
 BUSINESS COMBINATION
STATUTES
• Typically provide that if an Acquiror purchases
Target common stock in excess of a specified
threshold, it is barred from entering into a
business combination with Target for a
specified period, unless Acquiror has obtained
approval from:
1. a supermajority (e.g., 66.67%) of the shares
held by Target’s non-Acquiror shareholders, or
 INCREASE DEAL
EFFICIENCY
Requiring Acquiror (and
Target) to provide MNPI to
shareholders and adequate
time for shareholders to
consider the transaction
increases the likelihood that
other bidders for Target may
appear, with an auction sale
 STATE
SECURI
TIES
LAWS
KANSAS, 1911
 KANSAS,
Although Massachusetts
1911
required the registration of
railroad securities as early
as 1852, and other states
passed similar laws in the
late 1800s/early 1900s, the
real push for securities
regulation came from the
North American heartland.
 KANSAS, 1911
• Over a century ago, Joseph Dolley,
the Kansas Banking
Commissioner, took a stand
against “wildcat” stock
speculators peddling shares of
sham companies in his state.
• Many of the companies that
attracted Dolley’s wrath targeted
local farmers and widows with
wild investment schemes
promoting nonexistent mines,
Central American plantations, and
 KANSAS, 1911
In April 1910, Dolley sent a
notice to newspapers
throughout Kansas
announcing the creation of a
new agency, the Investment
Information Bureau (IIB).
 KANSAS, 1911
• The IIB was formed to provide
information about the financial
standing of companies offering to sell
stock to investors in Kansas.
• Its mission was to, in his words,
“protect the people of Kansas from
fakers with worthless stock to sell.”
• Complaints poured into
the IIB about
questionable companies.
Dolley provided
information to the public
about them, but he had
no legal authority to stop
their sale of stock.
• In his 1910 report to the
state legislature, Dolley
called attention to the
• In addition to asking for more funding for
the IIB, Dolley made the following
suggestion:
“I further recommend that the legislature pass a
law compelling all parties who offer stocks and
bonds for sale in Kansas to register with some
department of state, setting forth in detail their
securities, and requiring of them to furnish any
other information that said department may
demand of them, and to submit to a full
examination of their affairs if said department
• Dolley’s “blue
sky bill” became The term “blue sky law”
effective on originated a few years earlier
March 15, 1911. when a Kansas Supreme Court
justice declared his desire to
• With that, state protect investors from
speculative ventures that had
securities “no more basis than so many
regulation was feet of blue sky.”
born.
 STATE SECURITIES
LAWS
• State securities laws are
designed to protect individuals
from investing in fraudulent
securities offerings.
• They generally conform to their
federal counterparts (covered in
 STATE
ANTITR
UST
LAWS
 STATE ANTITRUST
LAWS
State antitrust laws also generally
conform to their federal
counterparts (the U.S. federal
antitrust laws are covered in
Lecture 3 of this Section).
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DISCUSSION QUESTIONS

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