Competition, Auctions & Negotiations in REIT Takeovers
Journal of Real Estate Finance and Economics, Vol. 50, No. 2, 2015
46 Pages Posted: 27 Jan 2013 Last revised: 26 Jan 2016
There are 2 versions of this paper
Competition, Auctions & Negotiations in REIT Takeovers
Competition, Auctions & Negotiations in REIT Takeovers
Date Written: September 3, 2013
Abstract
The lack of hostile takeovers and relatively modest wealth gains associated with REIT mergers motivate two fundamental yet previously unexplored questions: how competitive are REIT takeovers, and how exactly does a REIT sell itself to another firm? This paper examines these questions using hand-collected data from SEC merger filings. Four primary findings emerge from this study. First, REITs most often utilize a sales process resembling an auction, where an average of 19 potential buyers are contacted. Second, REIT mergers are on average just as competitive, or more so, as those in other industries. Third, the market for corporate control for REITs is more active than previously thought. Fourth, failure to account for publicly available signals that a REIT is for sale (which typically occur several months in advance prior to the official public merger announcement) results in omitting approximately one third of the total shareholder wealth effect produced by REIT mergers.
Keywords: REIT, merger, competition, auction, negotiation, information costs
JEL Classification: R33, L85, G34, D82, G14
Suggested Citation: Suggested Citation
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