Panel Pushes Back On Implementation Agreements

Key Points:

Fiduciary-outs should not be so restrictively drafted that they unreasonably prevent target directors from responding to approaches that could reasonably be expected to lead to a superior competing proposal.

It's not back to the drawing board, but bidders and targets may have to be a bit more circumspect when drafting merger implementation agreements.

The Takeovers Panel decision in Ross Human Directions clearly illustrates that the negotiation of a MIA is a three-sided contest. Those three sides are the bidder, the target directors - and potential rival bidders.

The Panel's concern is that the target board should perform the difficult balancing act of giving the bidder sufficient certainty to commit to a bid without completely or unreasonably shutting the door to potential rival bids. It is from that perspective that it recently examined the lock-up provisions negotiated between Ross Human Directions and bidder Peoplebank.