MOM condition when the controller is large (H2). In Part 4 I attempt to distinguish these two
potential effects through the use of multivariate analysis.
3.3. Lawyer effects
A third factor is the role of lawyers. Academic and practitioner commentary to date assume
that legal counsel will choose the optimal transactional form in freeze-outs, which in turn
assumes that information costs and lawyer agency costs are small. Interviews and informal
conversations with experienced New York City practitioners suggest that these assumptions may
not be correct.22 A variation on this theme is the possibility that certain lawyers and law firms
practitioner impressions yield the following hypothesis:
H4: The likelihood of using a tender offer increases when the controller’s outside
counsel has substantial M&A experience.
As above, there may be an interaction between Hypotheses H3 and H4: when the controller
holds a relatively small stake, the controller’s outside counsel may recommend a merger freeze-
out, regardless of its M&A experience, in order to avoid supermajority approval from the
22 See, e.g., Telephone Interview with Charles Nathan, Global Co-Chair of M&A, Latham & Watkins, New York City (Feb. 20, 2004) (“All things being equal, which they never are, I would go the Siliconix route nine times out of ten. And I think that’s where most of the sophisticated M&A guys I talk to are. . . . But there may be lack of awareness on the part of many lawyers of the availability and value of the Siliconix structure. . . . Old habits die slowly. People who do this once every four years, don’t keep up with the literature and would just as soon do it the old way. And since it’s not wrong – no Delaware lawyer is going to say it’s a bad way to do it – there’s a huge amount of inertia here.”);
23 See, e.g., Telephone Interview with Richard Hall, Partner, Cravath, Swaine & Moore, New York City (Mar. 4, 2004) (“In the current environment, I would say to a controlling stockholder, “it is very hard to see any reason to go the special committee route rather than the Pure Resources [tender offer] route.” But I believe there may be lawyers, who, when they observe some reluctance on the part of their controlling stockholder clients in acting unilaterally [through a tender offer], do not firmly enough impress upon them the benefits of the Pure Resources structure over the special committee structure. I think that certain New York City lawyers are more willing to be forceful in their advice to a client.”). Cf. Pak Mail Schedule 14A (“The merger structure for the transaction was selected for, among other reasons, its structural simplicity and ease of administrative execution, as opposed to more complex transaction structures.”).