To Scheme or Not to Scheme: Perceptions of Schemes of Arrangement Takeovers
Posted: 6 Aug 2009
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: Suggested Citation