Preemptive bidding, target resistance, and takeover premiums

Dimopoulos, Theodosios; Sacchetto, Stefano

doi:10.1016/j.jfineco.2014.07.013

Cited by 83 publications

(17 citation statements)

References 60 publications

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“…Otherwise, if the entry of potential competitors is not preempted, high control benefits increase the takeover premium as in the target resistance theory (Bebchuk (1994)). Our results differ from Dimopoulos and Sacchetto (2011), who also investigate the impact of preemptive bidding relative to that of target resistance, as we find that potential competition is the key driver of takeover premia whereas target resistance plays a role only for relatively weak bidders.…”

Section: Introductioncontrasting

confidence: 99%

“…This reservation price is learned by the winning bidder only at the end of the bidding process and, at that point, if the winning bid is below the minimum bid the bidder has the possibility to raise the offer. In their empirical test, Dimopoulos and Sacchetto (2011) provide evidence that the high premia observed in single bidder contests result from the need to overcome target resistance rather than potential competition. Our model differs from Dimopoulos and Sacchetto (2011) in that we endogenize this minimum acceptable offer, which, in each stage of the negotiation, equals the value of the target shareholders' best credible threat.…”

Section: Takeover Literaturementioning

confidence: 99%

“…This, however, requires him to pay some termination fees τ ≥ 0 to R. 15 , 16 As with tender offers, we assume that there is a potential competitor B…”

Section: T I D E C I D E W H E T H E R T O C O N T In U E To N E G O mentioning

confidence: 99%

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Competition and dynamics of takeover contests

Calcagno¹,

Falconieri²

2014

Journal of Corporate Finance

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This paper investigates the effect of potential competition on takeovers which we model as a bargaining game with alternating offers where calling an auction represents an outside option for each bidder at each stage of the game. The model aims to answer three main questions: who wins the takeover? when? and how?Our results are able to explain why the takeover premium resulting from a negotiated deal is not significantly different from that resulting from an auction, and why tender offers are rarely observed in reality. Furthermore, the model allows us to draw conclusions on how other dimensions of the takeover process, such as termination fees, target resistance and tender offer costs, affect its dynamics and outcome.

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Section: Introductioncontrasting

confidence: 99%

Section: Takeover Literaturementioning

confidence: 99%

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Competition and dynamics of takeover contests

Calcagno¹,

Falconieri²

2014

Journal of Corporate Finance

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“…These discussions suggest a negative relationship between policy uncertainty and the bid premiums. We run the bid premiums regressions on PU while controlling for other firm and deal characteristics, including SIZE, MARKET-TO-BOOK RATIO, BOOK LEVERAGE, PAST 12 MONTH STOCK RETURNS, FIRM AGE, AVERAGE SALES GROWTH, NONCASH WORKING CAPITAL, EXCESS CASH, STOCK DUMMY, CASH DUMMY (the mixed stock-cash payment is left out to avoid perfect collinearity), HIGH TECH DUMMY, DIVERSIFYING DUMMY, HOSTILE DUMMY, PUBLIC TARGET DUMMY, and CHALLENGE DUMMY (Officer (2003), Dimopoulos and Sacchetto (2014)). Columns 1 and 2 of Table 6 report the results of the bid-premium regressions with and without industry fixed effects, respectively.…”

Section: B Policy Uncertainty Payment Considerations and Bid Premiumsmentioning

confidence: 99%

Policy Uncertainty and Mergers and Acquisitions

Nguyen¹,

Phan²

2017

J. Financ. Quant. Anal.

474

220

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This research examines the relationship between policy uncertainty and mergers and acquisitions (M&As). We find that policy uncertainty is negatively related to firm acquisitiveness and positively related to the time it takes to complete M&A deals. In addition, policy uncertainty motivates acquirers to use stock for payment and to pay lower bid premiums. Acquirers, on average, create larger shareholder value from M&A deals undertaken during periods of high policy uncertainty, which is attributable to their prudence as well as the wealth transfer from the financially constrained targets to acquirers.

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“…Like Dimopoulos and Sacchetto (2014), we consider only the premium corresponding to the final offer. This is the winning bid in a successfully completed takeover or otherwise the last withdrawn bid in an unsuccessful takeover.…”

Section: Target Valuation: Offer Premiummentioning

confidence: 99%

How Accounting Firms Compete for Financial Advisory Roles in the M&A Market

Bilinski

Yim

2015

SSRN Journal

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Abstract. Thomson Reuter's quarterly rankings consistently place accounting firms among top ten financial advisors on mergers and acquisitions (M&A) in the mid-and low-end of the market. We propose that accounting firms lever their audit expertise to produce fairer target valuations, particularly in industries where the auditor specializes, and when the target has low reporting quality. These competitive strengths of accounting firms translate into tangible gains for bidders as transactions advised by accounting firms have (1) higher announcement day price reactions compared to deals with investment-bank financial advisors, (2) a lower likelihood the acquirer overpays for the target, and (3) a lower likelihood the deal will not complete. These acquirer benefits translate into more repeat business for accounting firms as they are more likely to advise on subsequent transactions. (JEL G34, M41, M49)

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Preemptive bidding, target resistance, and takeover premiums

Cited by 83 publications

References 60 publications

Competition and dynamics of takeover contests

Competition and dynamics of takeover contests

Policy Uncertainty and Mergers and Acquisitions

How Accounting Firms Compete for Financial Advisory Roles in the M&A Market

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