Management buyouts - En utredning av aktieägarskyddet vid management buyouts

Sammanfattning: It is common that takeover bids trigger various legal issues, but there are few types of takeover bids that raise as extensive legal issues as management buyouts. A management buyout is a type of acquisition in which board members or senior executives purchase the shares of their employer or principal. The problem with management buyouts is that on the one hand, the board members and senior executives have an obligation to place the interest of their firm’s shareholders above their personal interests, while on the other hand, the board members and executives are acquiring the business from those very shareholders and stand to benefit from doing so on as favourable terms as possible. Thus, there is a conflict of interest between the parties of the transaction. What distinguishes management buyouts compared to ordinary takeover transactions is that board members and senior executives, due to the fact they work in the target company, have an information advantage compared with the shareholders. Depending on how extensive the information advantage is, it can be used to influence the value of the company. This can be done, for example, by postponing investments until after the acquisition has been completed or by using earnings management techniques such as increased write-downs and changed accruals. Thus, in the light of the prevailing conflict of interest, board members and senior executives may transfer value from the shareholders to themselves by utilizing the information advantage. The primary purpose of this paper is to investigate whether the current regulation ensures that board members and senior executives are prevented from acting opportunistically towards the shareholders. In addition, this paper provides suggestions on how the regulations could be improved to better deal with opportunistic behaviour. This paper concludes that third-party bidders will not compete away board members’ and senior executives’ ability to behave opportunistically. Therefore, there is a need to regulate management buyouts. The main regulation aimed to solve the conflict of interest is that board members and senior executives are banned from participating in the decision-making process within the target company. Removing the tainted individual partially sanitizes the acquisition from the conflict of interest, but the ban does not take effect until the announcement of the offer, which means that the individual can act opportunistically until the offer is announced. The information advantage is primarily addressed by imposing an obligation on the target company to obtain and publish a fairness opinion. This paper concludes that the fairness opinion can be suitable for addressing the information advantage. However, its weakness is that the accuracy of the fairness opinion depends on the fact that the information on which it is based is both comprehensive and accurate. With regard to the conflict of interest, it is not in the interest of board members and senior executives to be transparent towards the person responsible for drafting the fairness opinion, which means that the fairness opinion may not reflect the company’s true potential. In summary, this paper concludes that there is a need to strengthen the regulations in order to address the board members’ and senior executives’ ability to behave opportunistically. This applies in particular to the information advantage as it is primarily used to achieve a transfer of value from the shareholders to the board members and senior executives. One of the suggested solutions is to increase the disclosure obligations e.g., board members and senior executives must explain why the takeover bid is being undertaken at the given time and present their data for the valuation.