Effective Post‐Signing Market Check or Window Dressing? The Role of Go‐Shop Provisions in M&A Transactions

32 Pages Posted: 25 Feb 2014

See all articles by Jin Jeon

Jin Jeon

Dongguk University

Cheolwoo Lee

Ferris State University

Date Written: January/February 2014

Abstract

This paper examines the use of go‐shop provisions in M&A. We find that go‐shop deals tend to have higher deal premiums and receive more competing bids while the length of the go‐shop period does not affect deal premium and competition. Also, deals are less likely to be completed when a go‐shop provision is included and when the go‐shop length is longer. However, go‐shops have no effect on the completion of high premium deals. We also find that the presence of a go‐shop provision leads to a positive market reaction to deal announcements. Overall, our findings support the proposition that go‐shops reflect the efforts of target managers to fulfill the Revlon duties in the form of a post‐signing market check, which is consistent with stewardship theory.

Keywords: go‐shop, no‐shop, Revlon duties, mergers and acquisitions, deal protection

Suggested Citation

Jeon, Jin and Lee, Cheolwoo, Effective Post‐Signing Market Check or Window Dressing? The Role of Go‐Shop Provisions in M&A Transactions (January/February 2014). Journal of Business Finance & Accounting, Vol. 41, Issue 1-2, pp. 210-241, 2014. Available at SSRN: https://ssrn.com/abstract=2400800 or http://dx.doi.org/10.1111/jbfa.12048

Jin Jeon (Contact Author)

Dongguk University ( email )

26 Pil-dong 3-ga
Jung-gu
Seoul, Seoul 100-715
Korea, Republic of (South Korea)

Cheolwoo Lee

Ferris State University ( email )

119 South State Street, BUS 366
Big Rapids, MI 49307
United States

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