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

See all articles by J. Harold Mulherin

J. Harold Mulherin

University of Georgia - Department of Banking and Finance

Kiplan S. Womack

UNC Charlotte, Department of Finance, Belk College of Business

Multiple version iconThere are 2 versions of this paper

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

Mulherin, J. Harold and Womack, Kiplan S., Competition, Auctions & Negotiations in REIT Takeovers (September 3, 2013). Journal of Real Estate Finance and Economics, Vol. 50, No. 2, 2015. Available at SSRN: https://ssrn.com/abstract=2207416 or http://dx.doi.org/10.2139/ssrn.2207416

J. Harold Mulherin

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States
706-542-3644 (Phone)

Kiplan S. Womack (Contact Author)

UNC Charlotte, Department of Finance, Belk College of Business ( email )

9201 University City Blvd.
Charlotte, NC 28223
United States
704.687.7584 (Phone)

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