The Williams Act

The Williams Act was passed in 1968 as one of the most important pieces of security legislation in M & A. It was significant in terms of merger activities in the 1970s and 80s.

Earlier, the tender offers were mostly unregulated, creating a concerning situation before the 1960s when only a few tenders were offered.

In the 1960s, such offers became popular as they allowed organizations and people to take control of corporations.

The offer used the securities as a consideration, and the Securities Act of 1933 provided certain limited regulation. 

The Senator and the Banking Committee chairman Harrison Williams proposed laws to regulate such activities,

Which had four main objectives – 

• To provide procedures and disclosures for acquisitions as a proper valuation of the acquiring firm shares depends on their detailed financial data availability. 

• To provide the shareholders with timely information to make decisions regarding the offers.

• To increase confidence in the securities market and provide information to lower investors' worries. 

• The stockholders of the target firms stampeded into tendering their shares to avoid receiving less advantageous terms.

Section 13(d) of the act was to provide an early warning system for the stockholders and target management to alert them about possible threats. 

It is related to the disclosures made by the buyer if their holdings reach 5% of the firm's total outstanding, they need to provide information related to their origin –

through the offers, open market purchases, private, or others.

The filing should be done within ten days of acquiring 5% of the issuer's outstanding stock.

Certain parties, like brokerage and the underwriters, are exempt from filing these requirements, who acquire the shares for 40 days. 

If the party does not belong to any of the exempt categories, they need to provide the details like -

Name and Address of the issuing firm and the type of securities to be acquired. 

• Detailed information about the individual's background (that must include any part of criminal activity).

• Information about the number of shares owned, the transaction's purpose, and the source of funds.

• All the bidders must provide all details about the transactions over 60 days before the offer. 

• Here is a special provision for various categories of investors, like the institutional investors who acquire 5% or more but did not acquire more than 2% in the last 12 months and those with no interest in taking control of the firm. Such investors may not require filing the form in detail. 

• He also provides disclosure for information in the tender offers through Section 14(d). 

• The act failed to address certain issues in such offers. The State's antitakeover legislation and other corporate mechanisms were designed to address the problems that led to hostile takeovers in the 1980s. 

It is difficult to find a publicly held firm not shielded by a poison pill, antitakeover statute, or both.

In the modern system, the management had the upper hand in incorporating government, and the composition of shareholders has changed since the 1960s

When individual shareholders held the firm's majority of shares, they sometimes remained ill-informed, biased, and atomized.

Today the shares are held by institutional investors who handle the resources and incentives so that the firm's control cannot be held even by accumulating 10% or higher position. 

Also, the role of shareholders has increased; typically, hedge funds do not seek control over the firm; instead, they need information related to the operations, corporate governance and liquidity, strategies, and capital allocations to create value for themselves and the other shareholders.