Irrevocable commitments and tender offer outcomes

Irrevocable commitments (ICs) are undertakings by target-firm blockholders to accept an upcoming takeover bid before its announcement. Using a novel manually collected dataset, we develop three new hypotheses and explore one existing hypothesis explain the use of ICs: (1) trade-off between speed price, (2) completion probability (3) differences in bargaining power, (4) blockholder certification. Transactions with more than 20% shares irrevocably committed have 7%–16% higher tender offer 8–10 days shorter duration. A transaction average-sized IC is associated 2.9 percentage points lower four-week premium no IC. Overall, results appear most consistent on versus price. The also partial evidence favor certification hypothesis.