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