Given the current slowdown in takeover activity, ASIC's takeovers experts are probably underemployed. It makes good sense to have them looking at ways the law can be improved. Conversely, the fact that takeover offers are so thin on the ground suggests Parliament should think long and hard before making them any more difficult.  Clayton Utz's THE REAL DEAL 2012 Half Year Update reveals that M&A activity is down 30% from 2011 levels.

Cynics might say that many shareholders would therefore be happy to settle for any deal at all, but few would seriously disagree with Mr Medcraft's concern about ensuring that all Australian shareholders get a fair deal.

It is interesting that the other takeovers regulator, the Takeovers Panel, faced this very issue quite recently. When it found that a bidder for Ludowici had made a last and final statement, the Panel had to choose between a strict application of ASIC's truth in takeovers policy (which would effectively have cut the bidder out of the battle for Ludowici) and the benefit for Ludowici shareholders of having two rival bidders compete for their affections.

In the end, although it continued to endorse the application of ASIC's policy, given the circumstances of the statement that had been made, the Panel opted for an order that would allow the bidder to stay in the race. It  came in for  a fair amount of criticism for this, but Ludowici's shareholders were the winners.

Similar concerns should inform any debate about reforming our takeover laws.

ASIC has in the last few weeks approached Treasury with 3 potential areas for reform:  amendments to the creep rule (under which shareholders with 19% or more can increase their shareholdings by 3% every 6 months), changes to the continuous disclosure rules to give more clarity to the circumstances in which a target needs to disclose the receipt of bear hug proposal and the introduction of a "put up or shut up" rule as exists in the UK, under which bidders who make a bear hug proposal have to proceed within a fixed period of time to a binding offer, or be prohibited from bidding for the target for a fixed period of time.

Leaving the debate about changes to the creep rule to one side for the moment, any reform in relation to the other issues ASIC has put to Treasury need to be carefully assessed to ensure that we don't end up with a regulatory regime tilted so far in the direction of targets that bidders leave our market in droves.

The bear hug tactic used by some bidders, including private equity firms, is seen by some as being unfair to target boards and distorting of the market. The receipt of a conditional and unfunded takeover proposal can put the board in a difficult position, especially when it is accompanied by a demand to be granted due diligence. Nervous shareholders and media commentators may demand that the board give in to a proposed bidder's demands, even though the board might suspect that the whole thing is just a tyre-kicking exercise. 

Target boards with a bear hug on the table face an even more challenging scenario in the current market environment when the proposed bid values the company at less than the board's view of its fundamental value, particularly where there is a substantial body of the target's shareholders agitating for the bid to proceed despite that fact.

There are always, however, two sides to any story.

It is true that, at one end of the spectrum, you can occasionally get a bear-hug that is more from the pages of Cinderella than any dealbook.

On the other hand, many genuine bids start off this way, particularly when the bidder is private equity.

That's the way private equity has to operate. Because private equity is not a trade buyer, because it has to raise funds from third parties and because it only works if the bid is 100% successful, due diligence is an inevitable first step before the bid can be concretised.

As a result, any attempt to force would-be bidders to premature commitment to a bid could see a significant number of such bidders curtail their activities in the Australian market.

Since private equity operates on a global scale, the end result would be a net loss to Australian shareholders, as takeover offers shrunk even further. Some may take the view that this bitter pill is a small price to pay for the sake of a supposedly better set of takeover rules.

Australia's shareholders may not be so idealistic. At the end of the day, they get to decide whether to accept a private equity bid. When you have bidders such as CHAMP paying a premium of 100% (in its successful bid earlier this year for oOh!media), you can see why shareholders might have a different perspective on this issue. 

It is also important to note that the dollars on offer are not the only factor that shareholders take into account when evaluating a bid. The current (July) proposal by private equity firm TPG to retailer Billabong has received the support of a number of institutional investors, even though TPG is offering less than it did under a proposal five months earlier.

Investors reportedly take a favourable view of the TPG proposal because of pessimism about Billabong's turnaround plans and the possibility that the TPG proposal may stimulate an auction for Billabong. This is another important - and, from the point of view of shareholders and the market, beneficial - function of private equity. It is extremely important, therefore, that any changes to the takeover laws do not cut private equity out of the takeover game and thereby deny shareholders a viable exit route from underperforming companies.

All this leads one to conclude that the real problem ASIC might be trying to solve here is not the balance of power that the Australian regulatory regime strikes between bidders and targets.  Rather, it is the balance of power between target boards and target shareholders - especially those target shareholders who have short term or relative value investment horizons, rather than a long term view of the fundamental value of a company and the patience to let the target deliver that value.  And that may cause many shareholders concern in a market where M&A activity is as low as it is.

*  THIS OPINION WAS CO-WRITTEN WITH JOHN ELLIOT, HEAD OF THE CLAYTON UTZ MERGERS & ACQUISITIONS GROUP