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Enhanced Scrutiny On The Buy-Side, Afra Afsharipour, J. T. Laster

Georgia Law Review

Empirical studies of acquisitions consistently find
that public company bidders often overpay for targets,
imposing significant losses on bidder shareholders.
Numerous studies have connected bidder overpayment
with managerial agency costs and behavioral biases that
reflect management self-interest. For purposes of
corporate law, these concerns implicate the behavior of
fiduciaries—the officers and directors of the acquiring
entity—and raise questions about whether those
fiduciaries are fulfilling their duty of loyalty. To address
comparable sell-side concerns, the Delaware courts
developed an intermediate standard of review known as
enhanced scrutiny. There has been little exploration,
however, of whether the rationales for applying
enhanced scrutiny …