Sandra Betton, B. Espen Eckbo, Rex Thompson, Karin Thorburn Merger negotiations with stock market feedback (01 Nov 2013) Available at ECGI: http://ecgi.global/working-paper/merger-negotiations-stock-market-feedback
Do pre-offer target stock price runups increase bidder takeover costs? We present model-based tests of this issue assuming runups are caused by signals that inform investors about potential takeover synergies. Rational deal anticipation implies a relation between target runups and markups (offer value less the runup) that is greater than minus one-for-one and inherently nonlinear.
If merger negotiations force bidders to raise the offer with the runup --- a costly feedback loop where bidders pay twice for anticipated target synergies --- markups become strictly increasing in runups. Large-sample tests support rational deal anticipation in runups while strongly rejecting the costly feedback loop.
Unlike the case of cross-border trade, there is no explicit international governance regime for cross-border M&A; rather, there is a shared understanding that publicly traded companies are generally for purchase by any bidder – domestic or...Read more
We document important shifts in occupational composition following merger and acquisition (M&A) activity as well as increases in median wages and wage inequality. We propose M&As act as a catalyst for skill-biased and routinebiased...Read more
We study anti-competitive mergers in a dynamic model with noisy collusion. At each instant, firms either privately choose output levels or merge, which trades off benefits of avoiding price wars against the costs of merging. There are three...Read more
This paper investigates whether non-executive directors associated with good (bad) board decisions are subsequently rewarded (penalized) in the market for directors. This question is addressed by assessing whether the post-acquisition performance...Read more