Collusion and Inequitable Prices in the EU Mandatory Bid Regime

Introduction

In EU takeover law, acquiring control of a listed company is costly. Under the mandatory bid rule (MBR), anyone who acquires control must offer to buy out all remaining shareholders at no less than the highest price paid for the target’s shares in the past 6-12 months. This rule is meant to guarantee an ‘equitable price’ for minority shareholders and to prevent inefficient transfers of corporate control.

Yet practice reveals a persistent challenge: collusion. By structuring parallel transactions that disguise part of the consideration for the controlling stake, acquirers and sellers can effectively reduce the price payable to minority shareholders. Such collusive arrangements undermine investor protection, distort the functioning of takeover regulation, and erode trust in capital markets.

In a recent article, we explore how collusion works in practice, its harmful effects on the market for corporate control, and how EU and national takeover regimes attempt—sometimes inadequately—to restore the ‘equitable price’.

How Collusion Works

Suppose an acquirer negotiates with the controlling shareholder to buy a majority stake. Instead of paying the full agreed price per share, the acquirer discounts it and makes up the difference via a side deal—like asset transfers, sweetheart contracts, or reinvestment opportunities.

Absent corrective intervention, the mandatory bid takes only the discounted share price into account—not the side consideration. As a result, minority shareholders receive an offer that falls short of the price the acquirer paid the seller for the same shares. The acquirer gains control on the cheap, the seller pockets full value through parallel deals, and minority shareholders are shortchanged. 

Experience shows the risk of collusion is more than theoretical, as the following cases illustrate.

Comparative Case Studies

• France: Groupama / Icade / Silic

In 2011, French insurer Groupama restructured its holdings through a complex set of transactions with Caisse des Dépôts et Consignations (CDC). Minority shareholders argued that CDC’s capital injection into a Groupama subsidiary amounted to hidden consideration, effectively lowering the mandatory bid price for Silic shares.
The Autorité des Marchés Financiers (AMF) approved the deal, and the courts ultimately upheld this view, applying a multi-criteria valuation approach that did not involve adjusting the bid price. The case underscores the limits of tackling collusion with allegedly ‘objective’ valuation criteria that ultimately override the substantive economic reality of side deals.

• Italy: Camfin / Pirelli

In 2013, Marco Tronchetti Provera’s holding company acquired Camfin shares at €0.80 per share from Malacalza Investimenti (MCI), triggering a mandatory bid. MCI reinvested the proceeds into Pirelli shares at a discounted price, with the sellers being Allianz and Fondiaria Sai.

The Italian regulator Consob treated this as collusion and raised the bid price to €0.83. But on judicial review, that decision was annulled, with the court holding that collusion requires proof of intent to evade takeover rules. The heightened burden under this narrow interpretation has been widely criticized for underprotecting minority shareholders and enabling opportunistic deal structures.

• Germany: Celesio / McKesson

Collusion can also arise in voluntary bids. In 2013, US health group McKesson offered €23 per share for German pharmaceutical distributor Celesio. Hedge fund Elliott, meanwhile, accumulated a stake—through shares and convertible bonds—that gave it veto rights. After negotiations, McKesson acquired Elliott’s position and increased its bid to €23.50 per share. Minority shareholders claimed that Elliott obtained additional compensation with the sale of the convertible bonds. German courts ultimately agreed, imposing an increase of the offer price (€7.45 per share). The case demonstrates how look-through anti-circumvention provisions can effectively help restore the best price rule even in voluntary offers.

Why Collusion is Problematic

• Distorting the ‘Equitable Price’

The highest price paid rule is not simply about equal treatment of shareholders. Rather, it ensures that the offer price reflects the exchange value the acquirer is willing to pay for control.

This serves two functions: protecting minority shareholders, who should receive no less than the real value attached to their shares, and deterring inefficient transactions, since acquirers who cannot afford the full acquisition cost will avoid triggering the MBR. In fact, collusion undermines both.

By shifting part of the consideration outside the share price, the acquirer can pay less for control. This makes it easier to pursue acquisitions that do not actually increase firm value, opening the door to value-destroying transfers of control.

• Undermining Market Confidence

Weak enforcement of the highest price rule also erodes trust in capital markets. If investors anticipate that acquirers can easily do away with their mandatory bid obligations, they will price in the risk of being shortchanged. This in turn increases the cost of capital and diminishes the credibility of the takeover regime as a whole.

EU and National Responses

The EU Takeover Directive acknowledges the risk of manipulation and empowers national laws or regulations to adjust the bid price in certain circumstances but leaves wide-ranging discretion over the actual definition and criteria to be applied in restoring the ‘equitable price’.

Two main methods exist. One relies on objective valuation criteria, like market averages, break-up value, and so forth. The other looks through the formal transaction to include any additional advantages that on substance were ultimately provided to the seller.

The first approach, adopted in France, appears consistent with the Directive’s text but fails in practice: ‘objective’ valuations hardly belong to the real world (each resting on contestable assumptions), ignore private benefits of control, and may yield to results still below the ‘equitable price’.

The second approach, adopted in Italy and Spain, appears more effective on paper—though hampered in practice by Italian courts’ narrow view of collusion. By requiring that any side benefits be folded into the bid price, this framework neutralizes collusive arrangements, ensures minority shareholders obtain the same value as the seller, and discourages acquirers from pursuing value-decreasing deals. Because quantifying such advantages is challenging, for this second approach to work, regulators should use their investigative powers to uncover the economic substance of transactions. 

Conclusion

Collusion strikes at the heart of the EU takeover regime by depriving minority shareholders of equitable treatment and by enabling inefficient transfers of corporate control. National experiences show varying degrees of effectiveness in tackling collusion, with the Italian and Spanish method of incorporating side advantages into the bid price offering the most robust protection.

To preserve investor trust and the deterrent force of the mandatory bid rule, enforcers must look past formality and confront the economic reality of transactions. Only then can the rule’s promise of an ‘equitable price’—a fair deal for all shareholders—deliver: protecting investors, anchoring legal certainty, and ensuring that takeovers create rather than destroy corporate value.

The authors’ article can be found here. 

Federica Cadorin is a Tenure-Track Researcher at the University of Milan.

Matteo Gatti is a Professor of Law at Rutgers Law School.