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form. The story in its strongest form, then, implies a circularity that is inconsistent with the

empirical evidence presented in this paper. Put simply, transactional form must be doing at least

some of the work in causing the differences in outcomes reported here.

Causation concerns with respect to choice of transactional form are less easily dismissed. It

is possible that a controller is more likely to hire experienced outside counsel when it knows that

it will execute its freeze-out via tender offer – that is, a client-driven effect rather than a lawyer-

driven effect. In order to attempt to isolate the causal chain running from choice of outside

counsel to transactional form chosen, I use a two-stage instrumental variable (IV) approach.

Following the methodology introduced by Maddala (1983:246) and illustrated by Comment &

Schwert (1995), I first run a probit regression to predict whether the controller will choose

outside counsel that has substantial M&A experience. In the second-stage regression I replace

the dummy variable EXPERIENCED with predicted values from the first-stage model. In these

regressions (unreported), I find that the coefficients for EXPERIENCED and

EXPERIENCED*CONTROL are consistently positive, as in Table 5, but they are not

statistically significant at any conventional level. I therefore cannot rule out the possibility that

the apparent connection between experienced outside counsel and transactional form is in fact

driven by client selection of outside counsel.

5. Case studies

A comparison of two recent and high-profile freeze-outs provides some texture to the

empirical findings presented in Part 4. In August 2004, Cox Enterprises (“CEI”) announced a

$8.3 billion merger freeze-out of the Cox Communications (“CCI”) minority shareholders. In

January 2005, News Corp. (controlled by Rupert Murdoch) announced a $6.0 billion tender offer

freeze-out

of

the

Fox

Entertainment

Group

minority

shareholders.

The

controller’s

initial

34

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