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Mr. Heleniak is a partner and Mr. Spera is an associate at New York ’s Shearman & Sterling. With the pace of corporate acquisitions in the United States continu ­ing at historically unprecedented levels, foreign purchasers, and in particular the British, have played an increasingly important role as buyers of America's businesses, most strikingly in the case of public company acquisitions. This role has been facilitated by the compara ­tive ease with which U.K. purchasers have been able to secure equity financing earmarked specifically for particular U.S. acquisitions through underwritten "rights issues." U.S. acquirers have been unable to tap public equity markets here for acquisitions because of timing and disclosure obstacles. While the U.K. market has not accorded all rights issues a resounding success, a partial catalogue of recent trans ­actions financed, at least in part, with rights issues would include Blue Arrow's acquisition of Manpower Incorporated, Dixons Group's acquisition of Cyclops Corporation, WPP's acquisition of JWT Group, and Boots' acquisition of Flint Labs. Underwritten rights issues involve the offer of new shares of a U.K. company to its existing shareholders on a pro rata basis. The advan ­tage such issues accord U.K. purchasers arises in part from the ability to synchronize such issues with acquisition transactions in the U.S., in particular acquisitions initiated by a tender offer. They permit the proceeds of the issue to be available shortly after the acquirer makes a purchase of the target's shares at the conclusion of the tender offer. Moreover, the U.K. regulatory framework enables British issuers to issue new shares for acquisition purposes without the same degree of disclosure as their U.S. counterparts; in the acquisition context, the principal differences concern pro forma financial statements and other disclosures concerning the impact of an acquisition on an issuer. Consequently, U.K. companies are able to finance U.S. public compa ­ny acquisitions through public equity issues where their U.S. competi ­tors, as a practical matter, cannot, and often the U.K. companies can do transactions on a less leveraged basis, at least during the near term, than American purchasers that must initially rely on borrowings to fund their acquisitions and only later attempt to raise equity to reduce indebtedness. These features of rights offers may help explain the striking success in certain recent transactions of U.K. purchasers who have acquired American enterprises significantly larger than themselves. Statutory Framework for Rights Issues. The issuance of new shares by public English companies is conditioned by the provisions of English law granting preemption rights to shareholders. The English Companies Act provides that new issues of shares must be offered first to existing shareholders pro rata with their holdings. There are important qualifications on the preemption right: it applies only when shares are issued for cash, and is circum ­scribed strictly by statute. Nevertheless, the existence of preemption rights helps define the options available to an English company seeking to tap the U.K.

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