Abstract

http://ssrn.com/abstract=1725031
 
 

Citations (2)



 


 



Financial Buyers vs. Strategic Buyers


Marc Martos-Vila


University of California, Los Angeles (UCLA) - Finance Area

Matthew Rhodes-Kropf


Harvard Business School - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Jarrad Harford


University of Washington; Centre for International Finance and Regulation (CIFR)

March 23, 2013

AFA 2012 Chicago Meetings Paper

Abstract:     
Within the great oscillations of overall merger activity there is a shifting pattern of activity between strategic (operating firms) and financial (private equity) acquirers. What are the economic factors that drive either financial or strategic buyers to dominant positions in M&A activity? We introduce debt market misvaluation in M&A activity. Debt misvaluation might seem limited since both types of acquirer (and the target) can access misvalued debt markets. However, moral hazard and insurance effect differences between types of buyers interact with potential debt misvaluation debt, leading to a dominance of financial versus strategic buyers that depends on debt market conditions.

Number of Pages in PDF File: 56

Keywords: private equity, buyout, acquisitions, moral hazard, governance, misvaluation

JEL Classification: G34

working papers series


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Date posted: December 15, 2010 ; Last revised: April 1, 2013

Suggested Citation

Martos-Vila, Marc and Rhodes-Kropf, Matthew and Harford, Jarrad, Financial Buyers vs. Strategic Buyers (March 23, 2013). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1725031 or http://dx.doi.org/10.2139/ssrn.1725031

Contact Information

Marc Martos-Vila (Contact Author)
University of California, Los Angeles (UCLA) - Finance Area ( email )
Los Angeles, CA 90095-1481
United States
Matthew Rhodes-Kropf
Harvard Business School - Entrepreneurial Management Unit ( email )
Soldiers Field Road
Rock Center 312
Boston, MA 02163
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jarrad Harford
University of Washington ( email )
Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)
HOME PAGE: http://faculty.washington.edu/jarrad/
Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

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