The Effect of Institutional Investors' Voice on the Terms and Outcome of Freeze-out Tender Offers

The Effect of Institutional Investors' Voice on the Terms and Outcome of Freeze-out Tender Offers

Beni Lauterbach, Yevgeny Mugerman

Series number :

Serial Number: 
576/2018

Date posted :

September 21 2018

Last revised :

December 04 2019
SSRN Share

Keywords

  • Going private transactions • 
  • Institutional Investors activism • 
  • bargaining with controlling shareholders • 
  • tender offers

We study the impact of institutional investors' “voice” on 201 going private tender offers by controlling shareholders ("freeze-out" offers) in Israel. Israeli regulatory intervention in freeze-out tender offers is relatively mild, thus institutional investors’ activism becomes crucial. We find that institutional voice has dual effects.

On one hand, when there are pre-negotiations with institutional investors’ (their voice is heard), accepted offers’ premiums increase. On the other hand, when institutional investors express their voice, yet reject the offer, these rejections appear to hurt shareholders’ value. We also document significant institutional investor exit after rejected offers, especially after offers preceded by voice (pre-negotiations with institutional investors).

Authors

Real name:
Yevgeny Mugerman