Corporate Directors Should Prepare for Rise in Unsolicited Takeover Offers,

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Source: The Conference Board

The Conference Board Governance Center issued today a report providing board members with a checklist of issues they should consider when facing unsolicited takeover offers. The report is the fifth in The Conference Board series on the oversight role of the board of directors in the current economic crisis.

Hostile offers have accounted for 47 percent of the M&A transactions that took place in the United States during the first few months of 2009, compared with 24 percent in all of 2008 and 7 percent in 2004. "Today’s market conditions permit some companies to be ‘put in play’ more easily than before," says Frederick H. Alexander, a partner at Morris, Nichols, Arsht & Tunnell LLP in Wilmington, Delaware, and author of the report for The Conference Board.

The concern particularly applies to companies with undervalued stock prices, surplus assets or constrained performance—often resulting from short-term liquidity issues—that invite bargain hunting by acquirers capable of obtaining financing or using their equity currency to pursue growth opportunities. Over the last few years, in response to pressures from proxy advisory groups and activist shareholders, some of those companies have reduced their structural takeover protections, by repealing poison pills and declassifying their boards, and may now be particularly vulnerable.

The Conference Board report encourages directors to become familiar with the corporation’s governance profile and the tactics that can be used to protect shareholders’ interests from opportunistic behaviors in the marketplace. "The tactics discussed in the report are not about thwarting unsolicited offers," says Alexander. "They are about ensuring that directors are given enough time to fulfill their fiduciary obligations and obtain the information necessary to make a rational business decision with respect to the offer, as well as to explore all alternatives."

"In these difficult times, The Conference Board is renewing its commitment to provide guidance to the boards of directors of its member companies," says Matteo Tonello, Associate Director, Corporate Governance at The Conference Board, and director of the report series. Among the recommendations included in the report: reviewing existing organizational (charter and bylaws) provisions; monitoring shareholder base and intentions; maintaining proactive external relations; and understanding how investors and gatekeepers (proxy advisors and governance rating agencies, in particular) could perceive and react to possible amendments to the company’s governance profile.

For more information or to receive a copy of the report, contact Matteo Tonello at 212-339-0335 or matteo.tonello@conference-board.org .

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Source:

The Role of the Board in Turbulent Times: Responding to Unsolicited Takeover Offers

EA No. 309, The Conference Board

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