The Legitimacy of Takeover Defense in the '90s

1. The courts have concluded that just because a price is higher does not mean it is necessarily in the fiduciary interests of shareholders (especially long-term ones). This is reasonable too, as in many ways, shareholders are more shortsighted

2. Even in the short term, shareholders are usually incentivized to accept offers, whereas auctions and negotiation may yield better offers (this reminds me of the latest season of Succession)

3. Somewhat interestingly, a study (Kidder) showed that companies that defended takeovers successfully were worth less, but companies that tried to defend a takeover but ended up being acquired by the original buyer or another buyer ended up being worth more

4. Different structures of offers (a 2-stage offer, where 51% of shares are acquired at one price and the remaining is acquired at another or not acquired) can make the offer pretty bad to a lot of shareholders, even though it coerces shareholders to pass it

The article concludes that because of all these factors, the board having more power is generally a reasonable thing. I think this generally matches up with the overall role of boards, and I generally agree.

I'm having trouble imagining the reverse, where there's a perfectly legitimate offer that the board wants to block.