Bond Tender Offers in Mergers and Acquisitions
Matthew T. Billett
Indiana University - Kelley School of Business - Department of Finance
July 28, 2016
Journal of Corporate Finance, Forthcoming
We explore the motives and consequences of bond tender offers announced in connection with mergers and acquisitions (M&A). We find merging firms use bond tender offers strategically to renegotiate with bondholders to gain financial flexibility by reducing leverage and eliminating covenants, and to curtail the coinsurance benefits associated with M&A. Moreover, we find bondholder wealth effects depend not only on the bond’s own characteristics, but also on the characteristics of its sibling bonds. Finally, the use of bond tender offers in M&A is associated with increased likelihood of deal consummation and lower acquisition premiums.
Number of Pages in PDF File: 34
Keywords: Mergers; Acquisitions; Bond tender offers; Coinsurance; Covenants
JEL Classification: G34, G32
Date posted: March 15, 2011 ; Last revised: August 3, 2016
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.235 seconds