The Equal Bid Principle: An Analysis of the Thirteenth Council Takeover Directive of the European Union

This paper analyzes the economic consequences of a proposal from the EU Commission: "The Amended Proposal for a Thirteenth Council Directive on Company Law, Concerning Takeover and Other General Bids" (1990). By implementing the Equal Bid Principle, the Directive enforces a potential bidder to extend the same tender offer price to all shareholders. The paper demonstrates that it is likely that the effect of the Equal Bid Principle is directly opposed to the declared goal of protecting the economic interests of shareholders in the target company. Moreover, it tends towards a direction opposite to the declared goal of stimulating corporate acquisitions. Copyright Blackwell Publishers Ltd 1997.