May 11, 2017
Takeover Defenses: IPOs v. Established Companies
This WilmerHale memo reviews market practice when it comes to takeover defenses at IPO companies, and compares their defenses to those in place at S&P 500 and Russell 3000 companies.
There are many similarities between IPOs & established companies – most companies have an advance notice bylaw, authorize a class of blank check preferred & prohibit shareholder action by written consent. However, there are a number of defenses that are much more prevalent among IPO companies. These include:
– Classified boards (77% of IPOs vs. 11% of S&P 500 and 43% of Russell 3000),
– Supermajority voting requirements (76% of IPOs vs. 21-41% of S&P 500 and 18-57% of Russell 3000 – varies depending on type of action)
– Limitation of stockholders’ right to call special meetings (94% of IPOs vs. 37% of S&P 500 and 51% of Russell 3000)
– Exclusive forum bylaws (59% of IPOs v. 36% of S&P 500 and 38% of Russell 3000)
One other thing that’s clear from the memo is that almost nobody has a “poison pill” in place these days – only 1% of IPOs, 3% of the S&P 500 and 5% of the Russell 3000 have adopted pills. Of course, that doesn’t count the many companies that have pills “on the shelf” & ready to be rolled out at a moment’s notice if needed.
– John Jenkins