The functionalization of arenes via diaryliodonium salts has gained considerable attention in synthesis, as these compounds react under mild conditions. Mechanistic studies have shown that the formation of corresponding λ(3)-iodane intermediates takes a key role, as they determine the course and selectivity of the reaction. Bridged diaryliodonium salts, featuring a heterocyclic moiety involving the iodine atom, were shown to exhibit a distinctly different reactivity, leading to different products. These products are not just the result of reductive elimination reactions but may also arise via radical mechanisms. Our quantum chemical calculations reveal that the λ(3)-iodane intermediate is also the "gateway" for reactions that are observed only for strained bridged systems. At the same time, we find a remarkable affinity of the hypervalent region to planarity for all reaction mechanisms. This also explains the correlation between the size of the bridge connecting the aryl groups and the reaction products observed. Furthermore, the energetics of these competing reactions are examined by analysis of the mechanisms. Finally, using model compounds, some of the basic features governing the reactivity of λ(3)-iodanes are discussed.