LOCKUPS AND THE MARKET FOR CORPORATE-CONTROL

This article analyzes the effect of lockups on the market for corporat e control. Prior scholarship on lockups has argued that lockups are ge nerally ineffective in allowing target managers to influence who acqui res a target firm. Accordingly, scholars who have taken this position have advocated leniency in judicial review of lockups. This article fi rst demonstrates that lockups can affect the outcome of bidding contes ts. It then analyzes the effect of lockups on the operation of the mar ket for corporate control and shows that judicial leniency toward lock ups would both weaken the disciplinary influence of the takeover threa t and reduce the number of value-enhancing acquisitions that occur. It concludes by discussing the proper legal treatment of lockups from th e perspectives of shareholder wealth maximization and social wealth ma ximization.