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than two-thirds of post-Siliconix freeze-outs still proceed through the traditional merger route. I

present evidence that controllers are more likely to choose a merger when they hold a relatively

small controlling stake, because the supermajority approval from the minority that would be

required in a tender offer can reduce or eliminate the advantages that a tender offer provides. I

also present evidence that the identity of the controller’s outside legal counsel influences the

choice of transactional form. Specifically, when the controller’s outside counsel has substantial

M&A experience, the freeze-out is more likely to be executed as a tender offer, particularly

when the controller is large and the target is incorporated in Delaware. I discuss the doctrinal

and policy implications of these findings in a companion paper. (Subramanian 2005)

The remainder of this paper proceeds as follows. Part 2 provides background on freeze-out

mechanics, describes the recent developments in the Delaware case law on freeze-outs, and

summarizes the academic and practitioner literature commenting on these developments. Part 3

develops

a

theory

of

freeze-outs

that

yields

four

testable

hypotheses.

Part

4

tests

these

hypotheses against a new database of post-Siliconix freeze-outs. Part 5 provides two brief case

studies that provide some texture to the econometric findings presented in Part 4. Part 6

discusses these findings. Part 7 concludes.

2. Background

A freeze-out (also known, with some occasional loss of precision, as a “going private

merger,” a “squeeze-out,” a “parent-subsidiary merger,” a “minority buyout,” a “take-out,” or a

“cash-out merger”) is a transaction in which a controlling shareholder buys out the minority

shareholders for cash or the controller’s stock. The traditional route for executing a freeze-out

uses the process outlined by the Delaware Supreme Court in Weinberger v. UOP1 and Kahn v.

1

457 A.2d 701, 709 n.7 (Del. 1983).

2

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