A New EU Business Combination Form to Facilitate Cross-Border M&A: The Compulsory Share Exchange

A New EU Business Combination Form to Facilitate Cross-Border M&A: The Compulsory Share Exchange

Luca Enriques

Series number :

Serial Number: 
218/2013

Date posted :

July 01 2013

Last revised :

July 09 2013
SSRN Share

Keywords

  • Mergers & Acquisitions • 
  • cross-border mergers • 
  • Cross-border Merger Directive • 
  • Squeeze-outs • 
  • takeovers • 
  • Takeover Bids Directive

Facilitating cross-border mergers and acquisitions has long been one of the
objectives of European company law directives and regulations. This short essay
shows that the current European legal framework unnecessarily raises the
transactions costs to be incurred when the acquirer aims both to gain 100 percent


of a company?s shares and to preserve the acquired company as a separate entity.
Higher transaction costs result from the limited availability of the squeeze-out
right. Instead of proposing to extend such right, which would be politically
contentious, the solution proposed here is for a directive to require member states
to let companies execute acquisition transactions via a ?compulsory share
exchange.? This is a transaction form in which the acquiring and the target
companies agree that the target shareholders will receive shares in the acquiring
company in exchange for their shares. It is shown that a subset of the rules
applying to cross-border mergers would be sufficient to regulate such
transactions.

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