Financial versus strategic bidders: Evidence from unsuccessful takeover bids

Financing bidders in takeover contests

The paper studies a takeover contests, in which cash-constrained bidders decide on the optimal way to …nance their cash bid. For both bidders and the seller this decision is at least as important as deciding on whether the payment should be in cash or in securities. The main result is that the optimal choice of the type of security contract (e.g., debt, equity, etc.) depends on bidders’access t...

Similar bidders in takeover contests

When bidders in a corporate takeover have related resources and post-acquisition strategies, their valuations of a target are likely to be interdependent. This paper analyzes a theoretical model and a laboratory experiment of sequential-entry takeover contests in which similar acquirers have correlated private valuations. Increased similarity between bidders has two effects on equilibrium biddi...

Stock Price Manipulation Through Takeover Bids

Hedge Fund Activism vs. Hostile Takeover Bids⇤

We compare hedge fund activism and hostile tender offers in a unified framework where any investor who acquires an equity stake to improve firm value faces a dual free-rider problem: Neither do dispersed shareholders sell their shares unless the price fully reflects the anticipated value improvement nor do those who retain their shares participate in the costs. We show that activism and tender ...

Toehold Strategies, Takeover Laws and Rival Bidders

Prior to the announcement of a tender offer, the bidding firm is legally allowed to acquire shares in the open market, subject to some limitations. These pre-announcement purchases are known as toeholds. This paper presents a simple model that describes the bidder's optimal toehold acquisition strategy, within an environment that closely parallels the present legal institutions. The model shows...