To Scheme or Not to Scheme: Perceptions of Schemes of Arrangement Takeovers

Posted: 6 Aug 2009

See all articles by Larelle Law Chapple

Larelle Law Chapple

QUT School of Business; Financial Research Network (FIRN)

Peter Clarkson

University of Queensland - Business School; Simon Fraser University (SFU) - Beedie School of Business; Financial Research Network (FIRN)

Daniel Hutchinson

Macquarie Bank Ltd.

Date Written: August 6, 2009

Abstract

It has been noted in prior papers that schemes of arrangements, in the last decade, are being used more as a device for achieving control, as a genuine alternative to a formal takeover bid. This is generally attributed to schemes being a more flexible transactional model. This article reviews the legal commentary on the advantages and disadvantages of schemes, and follows this through with a survey of practitioner attitudes and experience with using schemes. The practitioner survey reinforces the perception that schemes are ‘friendlier’. By pinpointing the qualitative characteristics of schemes and by providing some quantitative measures of the deal and of scheme participants, this article discusses the connotations of friendliness. This descriptive data show that scheme target shareholders generally earn less than on average in bid premium than bids and that scheme success is less dependent on the magnitude of any pre-bid stake the bidder may hold in the target prior to the scheme, than in a bid.

Keywords: Takeovers, Mergers and Acquisitions, schemes of arrangement

JEL Classification: G34, K22

Suggested Citation

Law Chapple, Larelle and Clarkson, Peter and Hutchinson, Daniel, To Scheme or Not to Scheme: Perceptions of Schemes of Arrangement Takeovers (August 6, 2009). Available at SSRN: https://ssrn.com/abstract=1444744

Larelle Law Chapple (Contact Author)

QUT School of Business ( email )

GPO Box 2434
Brisbane, Queensland 4001
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Peter Clarkson

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Daniel Hutchinson

Macquarie Bank Ltd. ( email )

Australia

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