Using Auction Theory to Inform Takeover Regulation

This paper focuses on certain mechanisms that govern the sale of corporate assets. Under Delaware law, when a potential acquirer makes a serious bid for a target, the target’s Board of Directors is required to act as would “auctioneers charged with getting the best price for the stock-holders at a sale of the company.’’1 The Delaware courts ’ preference for auctions follows from two premises. First, a firm’