Institutional Investors' Impact on the Outcome of Freezeout Tender Offers

We study institutional investors' impact on going private tender offers by controlling shareholders ("freezeout" offers) because these are occasions where engagement-restraining considerations such as keeping the long term relations with the firm are less relevant. Further, we examine data from Israel, where regulation over freezeout offers is loose and where (consequently?) about half of the offers are rejected. We find that in accepted offers, the offer premium increases with institutional investor holdings. Institutional ownership also increases the likelihood that the offer is rejected. However, in rejected offers, institutional investors do not appear to add to public value. This complex evidence is consistent with institutional investors acting as strategic bargaining agents.