Determinants and Shareholder Wealth Effects of the Sales Method in M&A

44 Pages Posted: 5 Dec 2014 Last revised: 6 Jun 2015

See all articles by Frederik P. Schlingemann

Frederik P. Schlingemann

University of Pittsburgh - Finance Group; Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Hong Wu

University of Pittsburgh - Department of Economics

Date Written: June 3, 2015

Abstract

We analyze the sales method for a sample of 575 acquisitions announced between 1998 and 2012 and find that targets choose auctions to maximize the target takeover premium through greater competition and to relax their financial constraints. Auctions, compared to negotiated deals, are associated with significantly higher target announcement returns, especially for relatively small targets. Bidder returns are positively related to auctions for bidders acquiring relatively small targets, not for the full sample. Taking into account size differences, we find that auctions, decrease target gains and increase bidder gains expressed in dollars.

Keywords: Sales Method, Mergers and Acquisitions, Auctions, Negotiations

JEL Classification: G30, G34

Suggested Citation

Schlingemann, Frederik Paul and Wu, Hong, Determinants and Shareholder Wealth Effects of the Sales Method in M&A (June 3, 2015). Available at SSRN: https://ssrn.com/abstract=2533482 or http://dx.doi.org/10.2139/ssrn.2533482

Frederik Paul Schlingemann (Contact Author)

University of Pittsburgh - Finance Group ( email )

368A Mervis Hall
Pittsburgh, PA 15260
United States
(412) 648 1847 (Phone)
(412) 648 1693 (Fax)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Hong Wu

University of Pittsburgh - Department of Economics ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

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