The Deal Process, Asymmetric Bidders and Target Premia

The Role of Accounting Quality in the M&A Market

“…In particular, the ability to make preemptive bids, as is common in the market for corporate control, overdeters entry by other bidders relative to the social optimum, which transfers rents to the buyer. These findings are consistent with recent empirical evidence presented by Aktas et al (2010), Xie (2010), andDeBodt et al (2012), who find that negotiations are most often initiated by bidders.…”

One size does not fit all: Selling firms to private equity versus strategic acquirers

“…The link between initiation and selling mechanism choice is documented also in Aktas et al (2010). Xie (2010) also highlights that target initiation is a very important factor but they do not focus on the buyer type. Also, poor stock performance and analyst coverage significantly increase premiums.…”

“…Panel B of Table 2 shows that the adjusted premium is larger for buyer (51%) versus target initiated deals (44%) which suggests that it might be important to control for deal initiation throughout our analysis (Simsir, 2008;Xie, 2010;Macias et al, 2011). Buyer initiated deals are slightly larger and more often use negotiations whereas target initiated deals are mostly organized in full-scaled auctions.…”

Determinants and shareholder wealth effects of the sales method in acquisitions

“…Masulis and Simsir (2013) show that target deal initiation is associated with lower announcement abnormal returns and link this finding to information asymmetries concerning the quality of target firms. Xie (2010) argues that bidder initiation reveals the selling firm's bargaining power, but also the bidder's valuation, which result in higher premiums. Xie (2010) et al (2012) find that a higher willingness to sell through target initiation is associated with lower premiums, but also increases deal success probability.…”

“…Xie (2010) argues that bidder initiation reveals the selling firm's bargaining power, but also the bidder's valuation, which result in higher premiums. Xie (2010) et al (2012) find that a higher willingness to sell through target initiation is associated with lower premiums, but also increases deal success probability. Finally, Fidrmuc and Xia (2014) find that targets that initiate deals are financially more constrained.…”