The U.K. Panel on Takeovers and Mergers has announced that it plans to amend the Takeover Code to reduce the tactical advantage that hostile offerors have under the current code, particularly when short-term investors unduly influence the outcome of hostile offers to the detriment of the offeree company and its shareholders.

The Takeover Panel, which regulates takeover bids and other merger transactions for companies with registered offices in the U.K. if their securities are traded on regulated markets, has determined, among other matters, that (i) an offer’s announcement can destabilize the offeree company “and often leads to significant changes in the composition of the shareholder register”; (ii) a drawn-out bid period “can adversely affect the conduct of the offeree company’s business and the offeree company board’s negotiation position with an offeror”; (iii) an offeror is often able to bypass the offeree company’s board and deal directly with shareholders in discussing the merits of an offer and the price at which it might be made; and (iv) while the costs to offerors of making a possible offer announcement are not significant, the offeror receives protections under the code “in restraining the offeree company from taking any action that might frustrate the offer.”

The proposed changes would shorten the period between the announcement of a possible bid and the receipt of a firm offer, require more complete financial disclosures by both companies, give employees more of an input on possible mergers, and make offer-related fees more transparent.