Optimal Acquisition Strategies in Unknown Territories

Koska, Onur A.; Staehler, Frank

doi:10.1628/093245614x14001382825101

Cited by 5 publications

(4 citation statements)

References 14 publications

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“…In cross-border investments, however, some firms are better informed than others. In the case of foreign acquisition of existing local assets, for instance, the majority of targets have been the firms that are not publicly listed (Ang and Kohers, 2001;Draper and Paudyal, 2006) resulting in information asymmetries that crucially affect multinationals' investment strategies (Koska and Stähler, 2014; Lópes Duarte and García-Canal, 2004; García-Canal et al, 2002; Shen and Reuer, 2005). To address this, the model is extended so as to take information asymmetries among firms on board.…”

Section: Introductionmentioning

confidence: 99%

A consumer-surplus standard in foreign acquisitions, foreign direct investment, and welfare

Koska

2018

Rev World Econ

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This study scrutinizes the ramifications of the strategic use of a consumer welfare argument in regulating foreign acquisitions and foreign market entry (i) on a multinational's choice between acquiring a local firm's existing assets (via negotiations or auctions) and investing in new assets via greenfield entry, or trade, under both complete and incomplete information; and (ii) on welfare. Any foreign acquisition fulfilling a minimum output requirement imposed by the host country as part of the foreign market entry regulation is in the best interest of the multinational even when there is complete trade liberalization. A local firm appropriates a bigger share from acquisition gains in an auction, and prefers generating information asymmetries. Welfare improves with a larger scope for ex-post firm heterogeneity when the foreign market entry regulation includes a minimum output requirement for foreign acquisitions based on consumer welfare.

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Section: Introductionmentioning

confidence: 99%

A consumer-surplus standard in foreign acquisitions, foreign direct investment, and welfare

Koska

2018

Rev World Econ

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“…This should not be confused with take-it-or-leave-it acquisition offers to target firms that are desinged to separate types (see Koska and Stähler, 2014).…”

Section: The Scope Of Pooling Auctionsmentioning

confidence: 99%

The scope of auctions in the presence of downstream interactions and information externalities

2017

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We scrutinize the scope of auctions in the presence of downstream interactions and information externalities by using the topical example of a firm acquisition. We show that no mechanism exists that allows an investor to acquire a low-cost firm under incomplete information: a separating auction implies adverse selection and relies substantially on commitment to allocation and transfer rules. A pooling auction serves as a commitment device against ex-post opportunistic behavior and alleviates adverse selection. It can earn the investor a higher expected payoff than a separating auction, even when consistency is required as to qualify for a sequential equilibrium. Terms of use: Documents in EconStor mayJEL-Code: D440, D820.

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“…14 A pooling auction is strategically equivalent to a game in which an investor (i) can make simultaneous take-it-or-leave-it offers to both firms and (ii) has a certain belief structure on types depending on their unilateral acceptance. This should not be confused with take-it-or-leave-it acquisition offers to target firms that are desinged to separate types (see Koska and Stähler, 2014).…”

Section: The Scope Of Pooling Auctionsmentioning

confidence: 99%

The Scope of Auctions in the Presence of Downstream Interactions and Information Externalities

2015

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We scrutinize the scope of auctions for firm acquisitions in the presence of downstream interactions and information externalities. We show that no mechanism exists that allows an investor to acquire a low-cost firm under incomplete information: a separating auction implies adverse selection and relies substantially on commitment to allocation and transfer rules. A pooling auction serves as a commitment device against ex-post opportunistic behavior and alleviates adverse selection. It can earn the investor a higher expected payoff than a separating auction, even when consistency is required as to qualify for a sequential equilibrium.

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Optimal Acquisition Strategies in Unknown Territories

Cited by 5 publications

References 14 publications

A consumer-surplus standard in foreign acquisitions, foreign direct investment, and welfare

A consumer-surplus standard in foreign acquisitions, foreign direct investment, and welfare

The scope of auctions in the presence of downstream interactions and information externalities

The Scope of Auctions in the Presence of Downstream Interactions and Information Externalities

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