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Turning to the lower half of the Figure 2 roadmap, the general picture of the merger process

seems to be vigorous bargaining between the SC and the controller, indicated both by the high

rate of SC formation (80 out of 85 deals, or 94%) and the high rate of impasse between the

controller and the SC (18 out of 80 deals, or 23%). In contrast, conditional on SC approval,

minority shareholder approval seems to be only a minimal constraint: only 33% of one-step

merger deals (18 out of 55) were subject to a MOM condition, and among these 18 deals all but

one (Johnson Outdoors) received the requisite level of minority shareholder support.

A final point from Figure 2 is the consummation rate: 30 out of 36, or 83%, for deals initiated

as tender offers, compared to 67 out of 85, or 79%, for deals initiated as merger freeze-outs. A t-

test indicates that this difference in success rates is not statistically significant at 95%

confidence. By way of comparison, Coates & Subramanian (2000) report that the completion

rate for arms-length, friendly M&A transactions during the period 1988-1999 was 87%.

Table 1 provides the state of incorporation for the targets in the sample, broken down by

choice of transactional form.

[insert Table 1 here]

Table 1 shows that 59% of freeze-out targets are incorporated in Delaware, higher than

Delaware’s overall market share of approximately 50% among U.S. publicly-traded companies

(Subramanian 2002, Bebchuk & Cohen 2003). Delaware’s larger market share among freeze-

outs may be due to its more well-developed case law, which might promote freeze-outs, or

because companies that contemplate moving between public and private status are more likely to

incorporate

in

Delaware,

or

both.

Table

1

also

shows

that

Delaware’s

share

varies

by

transactional form: 71% (25 out of 35) for tender offer freeze-outs, compared to 54% (45 out of

84) for merger freeze-outs.

20

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