Critical Assessment of the Cross-border Mergers Directive (Directive 2005/56/EC): Proposals for Reform

The Takeover Bids Directive (Directive 2004/25/EC) is a compromise and watered down version of a proposal which the Commission envisaged would lead to a more effective pan-European takeover regime than that which actually proved possible. The two key provisions of the Directive have been made optional for Member States (non-frustration rule and breakthrough rule). The Takeover Bids Directive is characterized by a complex optionality and reciprocity regime, while its mandatory provisions (such as the mandatory bid rule) are suffering from certain deficiencies.

This paper will examine if more harmonization is going to solve these problems. It will examine carefully the evolution of EU financial markets and the impact of the Takeover Bids Directive on the EU market for corporate control, as well as on the national markets for corporate control. It will focus on the possible amendment of the Takeover Bids Directive. In 2012, the European Commission conducted a study and adopted a Report on the application of the Directive on Takeover Bids. This Report will be scrutinized closely. The minimum harmonization technique adopted by the European legislature, the optionality, the reciprocity and the various other substantive deficiencies of the Takeover Bids Directive need to come under close scrutiny. This paper will therefore focus on the directions of a possible future reform of the Takeover Bids Directive. The crucial question is whether we need more harmonization in the EU market for corporate control. The paper will suggest possible amendments which could ameliorate the current harmonized framework.