NYSE/Deutsche Boerse Merger: Backroom deals no longer acceptable

That the US suffers from an excess of litigation is well known. There is also a surplus of shareholders willing to take a chance and sue companies in the hope of getting some financial gain at the expense of the other shareholders. But when a shareholder announces (Bloomberg) that he is going to sue NYSE Euronext seeking to block its planned $9.53 billion sale to Deutsche Boerse AG we have sympathy for his motives.
Mergers always carry the risk that one of the two parties is profiting at the expense of the other. It may be the buyer or the seller but as value is not easy to ascertain it is likely that in the majority of the transactions there is a loosing party. All the more reason to prevent managements from taking hasty decisions. Pro-Gov is against all sorts of 'lock-ins' that make it costly for one of the two parties to abandon the deal if their respective shareholders reject the proposal. The voting system should also be adjusted to avoid a narrow group of shareholders to dominate the outcome of any vote. The quorum should be high enough to prevent the buyer from reaping the equivalent of the 'consumer surplus' - the situation where dispirited shareholders that would have held out for a higher-than-agreed buyout price throw in the towel in order to avoid being left with holdings as a (largely disenfranchised) minority shareholder.
(17/02/2011)