The following is contained at the end of a June 28, 2006 Wachtell, Lipton, Rosen & Katz memo addressing the recent Court of Appeals decision to vacate SEC hedge fund registration requirements:
In this era of hedge fund activism, the future of hedge fund regulation may impact the balance of power between public companies and activist shareholders. In contests for corporate control, unregistered hedge funds typically enjoy greater advantages of stealth and flexibility. The transparency and restraint created by the Hedge Fund Rule make for a fairer fight when hedge funds attack. At this time, public companies can only hope that some form of hedge fund regulation persists.
This is not surprising considering the firm, according to its website, “originated the so-called ‘poison pill.'” It is also consistent with earlier Wachtell memos concerning hedge funds (see here and here). I would, however, like Wachtell to elaborate on their “fairer fight” point. How does hedge fund regulation make a takeover fight fairer? If anything, doesn’t management currently have an unfair advantage in a takeover fight? In fact, maybe instead of hedge fund regulation, Congress should consider rolling back the Williams Act to increase the disciplinary effect of the market for corporate control.