find the latest legal job
Senior Associate - Litigation & Dispute Resolution
Category: Litigation and Dispute Resolution | Location: Melbourne CBD & Inner Suburbs Melbourne VIC
· Come work for a firm ranked in Lawyers Weekly Top 25 Attraction Firms
View details
Associate - Workplace Relations & Safety
Category: Industrial Relations and Employment Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Employer of choice · Strong team culture
View details
Freelance Lawyers
Category: Banking and Finance Law | Location: All Perth WA
· Freelance opportunities through Vario from Pinsent Masons
View details
Freelance Lawyers
Category: Other | Location: All Adelaide SA
· • Qualified lawyer with a strong academic background
View details
Freelance Lawyers
Category: Other | Location: All Melbourne VIC
· • Qualified lawyer with a strong academic background
View details
M&A methodology debate sparked at Freehills

M&A methodology debate sparked at Freehills

THERE NEEDS to be a more rational debate on schemes of arrangement and how they affect “change-of-control” transactions, according to Freehills mergers and acquisitions partner Tony…

THERE NEEDS to be a more rational debate on schemes of arrangement and how they affect “change-of-control” transactions, according to Freehills mergers and acquisitions partner Tony Damian.

A new book written by Damian and Freehills senior associate Andrew Rich traces the various perceptions of schemes, which have been criticised for the last 25 years, Damian said.

“It’s time to end the unwarranted criticism and to accept the proper place of schemes of arrangement in the Australian corporate landscape,” he said.

Schemes, Takeovers and Himalayan Peaks examines the legislative response as well as the legal challenges to the use of schemes since they were first used in this country in the late 1970s.

There have been calls from some quarters to end the use of schemes of arrangement to affect change of control transactions of listed companies, Damian said.

The Australian Shareholders’ Association (ASA) has been one of the main critics of schemes, along with a number of institutional investors. The criticism reached a high point in 2003 with the MIM/Xstrata and HBOS/BankWest schemes.

Recently, the ASA called for a change to the law, requesting that mergers by way of schemes are eradicated.

Commentators in the press have also jumped on the bandwagon, Damian said in an interview with Lawyers Weekly. “The book is there to reintroduce and address this very emotional debate.”

“It is said that schemes are done on the cheap. The evidence simply doesn’t support that view. Schemes facilitate auctions. Imagine suggesting to the shareholders of [Australian Leisure & Hospitality (ALH)] that the proposed Newbridge scheme was a bad thing.”

Critics say that schemes also deprive shareholders of value and do not adequately protect small shareholders.

But schemes facilitate a competitive market for listed companies, according to the authors, and are particularly well suited to negotiated or “friendly” deals. Providing this alternative acquisition method also allows companies to take part, the authors argue they lead to better value for shareholders.

They propose wide-ranging reforms to the scheme procedure to ensure schemes are supported appropriately in the future.

“There is a clear case for reform — the Corporations Act should leave no room for doubt that schemes are a true alternative to takeovers in effecting control transactions,” Damian said.

Acknowledging that schemes and takeovers are different, Damian said, however, that both help to ensure the market for corporate control is kept competitive.

“We should be encouraging control transactions that deliver value to shareholders and that keep the pressure on management teams to perform,” he said. “Securing the future of schemes is one way of doing that.”

There has been support for this defence of schemes, Damian said, and it has become clear “that not everyone is on the anti-scheme bandwagon”.

Damian expects to take the matter of reform up with the Government, arguing it has a responsibility to ensure that the statutory infrastructure for those undertaking corporate deals is solid.

Damian said the Himalayan Peaks reference, in the book’s title referred to a court case in the early 1990s in which someone said a transaction should have been done by takeover. But the judge said that just because takeovers are there doesn’t mean they should necessarily be used. It is not Mount Everest, the judge said.

So the reference, said Damian, suggests there are other mountains to climb.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

M&A methodology debate sparked at Freehills
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Scales of Justice, ALA, right-to-die law
Oct 24 2017
‘Right-to-die’ laws would be a relief for terminally ill: ALA
The passage of an assisted dying bill through the lower house of Victorian Parliament has been haile...
Oct 24 2017
Diversity top of agenda for future WA Law Society president
The advancement of diversity in the Western Australian legal profession will be one of the key items...
Oct 23 2017
How to fail well
The legal profession is due for an attitude adjustment when it comes to perceived failures, accordin...
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...