The Value of 'Just Say No': A Response to ISS

Abstract

On October 22nd 2014, ISS published a note on the financial consequences for shareholders to vote “NO” to a proposed takeover (available in an article by Steven Davidoff Solomon, “The Consequences of Saying No to a Hostile Takeover Bid”, published on October 28th, 2014, in the New York Times DealBook). ISS claims to have demonstrated that those shareholders who voted “No” to a proposed takeover of their company would have been better off financially, had they agreed to the takeover.

Unfortunately, the ISS note does not support such a blanket statement. Our take on the ISS paper highlights many debatable aspects of their analysis. We show that the paper produced by ISS to support the position of hostile bidders falls flat. It is marred by dubious analytical choices, questionable metrics and the remarkable absence of a key investment parameter, the risk/return relationship.

Keywords: ISS, takeover bid, key investment parameter; risk/return relationship.