Does Merger Structure Matter?

Managerial Finance, Forthcoming

40 Pages Posted: 29 Jun 2011

See all articles by Grace Qing Hao

Grace Qing Hao

Department of Finance and Real Estate, The University of Texas at Arlington

John S. Howe

University of Missouri at Columbia - Department of Finance

Date Written: June 21, 2011

Abstract

A friendly merger can be structured as a one-step transaction or a two-step transaction. For a variety of reasons, such as the fast speed with which two-step mergers are completed, there are concerns about whether target shareholders are disadvantaged by this structure in comparison with one-step mergers. Controlling for deal and firm characteristics and the endogenous nature of the choice of transaction form, we find no evidence of detrimental effects of two-step mergers on target shareholders. Our findings suggest that at least some one-step mergers could benefit from using the two-step structure. We provide several explanations for the continued use of one-step mergers.

Keywords: mergers, merger structure, two-step mergers, negotiated tender offers, shareholder wealth effects, securities and exchange commission’s “best-price” rule

JEL Classification: G34, K22

Suggested Citation

Hao, Grace Qing and Howe, John S., Does Merger Structure Matter? (June 21, 2011). Managerial Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1874784

Grace Qing Hao (Contact Author)

Department of Finance and Real Estate, The University of Texas at Arlington ( email )

701 S. West Street
Arlington, TX 76019
United States

John S. Howe

University of Missouri at Columbia - Department of Finance ( email )

224 Middlebush Hall
Columbia, MO 65211
United States
573-882-5357 (Phone)
573-884-6296 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
79
Abstract Views
887
rank
314,611
PlumX Metrics