Corporate acquisition process: Is there an optimal cash-equity payment mix?

Bruslerie, Hubert de La

doi:10.1016/j.irle.2011.07.003

Cited by 17 publications

(17 citation statements)

References 33 publications

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“…Mode of payment is a critical decision as it signals the level of confidence of the acquirer in achieving postdeal synergies (de La Bruslerie, 2012) and hence it has a substantial impact on the wealth creation of shareholders (Betton, Eckbo, & Thorburn, 2008).…”

Section: Mode Of Paymentmentioning

confidence: 99%

Interorganizational imitation and payment mode decisions in cross‐border acquisitions

Chhabra

Popli

2018

Strategic Change

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Acquiring firm imitates the payment method decisions made by prior foreign acquirers targeting the same host country in cross-border acquisitions. Information asymmetry and bounded rationality induces acquirers to imitate the decisions of other foreign firms in the similar context.Mimetic behavior of the firms is more salient when the acquiring firm belongs to a country with high uncertainty avoidance cultural attribute and when institutional uncertainty is high in host country. The hypotheses are tested using binary logistic regression on a dataset of 1,136 crossborder acquisitions done by a group of seven countries during 2000-2010.

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Section: Mode Of Paymentmentioning

confidence: 99%

Interorganizational imitation and payment mode decisions in cross‐border acquisitions

Chhabra

Popli

2018

Strategic Change

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“…t , where ϑ 1 > 1 and ϑ 2 < 0 are roots of the quadratic equation of (9). As the no-bubble condition lim Rt→0 g c t = 0, the solution of (A.10) is…”

Section: A Proof Of Lemmamentioning

confidence: 99%

Mergers and Acquisitions Strategy under Imperfect Information: A Mixed-payment Model

Chen

2017

IJROS

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This paper develops a dynamic model of a joint takeover to determine the timing, acquisition premiums, and terms. The model incorporates imperfect information and the strategy by solving a Markov perfect Nash equilibrium. The results predict that the acquirer will make a high cash payment to the target to gain high post-merger management control. The abnormal return to the participating firm can be positive or negative due to asymmetric information. In addition, the model relates the acquisition premium payment and the merger threshold to the growth rate, volatility, and correlation coefficient of the acquirer and target.

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“…The choices are not univocal but occur in a process conveying private information from one party to the other. La Bruslerie (2012) analyses the interaction of the relationship between offer premiums and the means of payment. If the risk on the target's assets is important and if the acquirer's shareholders are risk averse, the latter may prefer payment in shares.…”

Section: The Contractual Nature Of Manda Transactionsmentioning

confidence: 99%

“…Theoretically, from the buyer's point of view, (i) correlated activities and economic risk between the target and the acquiring firms will result in a larger payment with cash, and (ii) a trade-off develops between the percentage in cash and the premium paid in the acquisition (La Bruslerie, 2012). For the acquirer, the cash payment portion increases with prospective profit due to synergy gains, as in Shleifer and Vishny (2003).…”

Section: The Contractual Nature Of Manda Transactionsmentioning

confidence: 99%

“…The alternative hypothesis is that there are possibly three different regimes of means of payment, each one explaining either the full-cash, the full equity, or the mixed cashequity payments. The idea of three regimes is based on the hypothesis that the full equity and the full cash payments are "corner solutions" for a rational investor (La Bruslerie, 2012).…”

Section: Determinants Of the Payment Decisionmentioning

confidence: 99%

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Crossing takeover premiums and mix of payment: An empirical test of contractual setting in M&A transactions

Bruslerie

2013

Journal of Banking & Finance

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The analyses of the tender offer premiums and of the means of payment should not be performed separately. In the empirical literature, these two variables are often considered independently, although they may have an endogenous relationship in a contractual setting. Using a sample of European M&As over the 2000-2010 decade, we show that these two variables are jointly set in a contractual empirical approach. The relationship between the percentage of cash and the offer premium is positive: higher premiums yield payments with more cash.We highlight that the payment choice is not a continuum between full cash and full share payments. Two different regimes of payment in M&A transactions are empirically characterized. We analyze the major determinants of M&A terms when the offer premium and the means of payment are jointly set. The underlying rationale of an asymmetry of information and a risk-sharing calculus is found to be significant in the setting of the agreement.

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Corporate acquisition process: Is there an optimal cash-equity payment mix?

Cited by 17 publications

References 33 publications

Interorganizational imitation and payment mode decisions in cross‐border acquisitions

Interorganizational imitation and payment mode decisions in cross‐border acquisitions

Mergers and Acquisitions Strategy under Imperfect Information: A Mixed-payment Model

Crossing takeover premiums and mix of payment: An empirical test of contractual setting in M&A transactions

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