Abstract

http://ssrn.com/abstract=2220006
 
 

References (31)



 
 

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Means of Payment and Timing of Mergers and Acquisitions in a Dynamic Economy


Alexander S. Gorbenko


London Business School

Andrey Malenko


MIT Sloan School of Management

January 29, 2014


Abstract:     
We study the interplay between bidders’ equilibrium timing of acquisitions, means of payment (cash versus stock), and takeover premiums when bidders are cash-constrained. Because of ability to bid in stock, constraints have no effect on bidders' maximum willingness to pay. However, both own and rivals’ constraints usually make a bidder more reluctant to initiate a bid. The effect of own constraints is opposite for high-growth high-synergy targets. Both fundamentals and cash constraints drive acquisition activity. Positive- but low-synergy targets are either never acquired or acquired after they have grown and using stock, while the opposite is true for high-synergy targets.

Number of Pages in PDF File: 66

Keywords: Auctions, financial constraints, mergers and acquisitions, real options, security design

JEL Classification: D44, G32, G34

working papers series


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Date posted: February 18, 2013 ; Last revised: January 30, 2014

Suggested Citation

Gorbenko, Alexander S. and Malenko, Andrey, Means of Payment and Timing of Mergers and Acquisitions in a Dynamic Economy (January 29, 2014). Available at SSRN: http://ssrn.com/abstract=2220006 or http://dx.doi.org/10.2139/ssrn.2220006

Contact Information

Alexander S. Gorbenko
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
+44 0 7966908276 (Phone)
HOME PAGE: http://www.stanford.edu/~gorbenko
Andrey Malenko (Contact Author)
MIT Sloan School of Management ( email )
100 Main Street
E62-619
Cambridge, MA 02142
United States
617-225-9301 (Phone)
HOME PAGE: http://www.mit.edu/~amalenko
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