How Do Valuations Impact Outcomes of Asset Sales with Heterogeneous Bidders?

57 Pages Posted: 23 Jan 2017 Last revised: 16 Aug 2017

See all articles by Alexander S. Gorbenko

Alexander S. Gorbenko

University College London - Department of Economics and School of Management

Date Written: August 04, 2017

Abstract

Differences among bidder type-specific outcomes of asset sales that attract multiple types of bidders are theoretically related to differences in their average valuations, valuation dispersions, and participation. The lead application to quantify these relationships is takeover auctions: bidders are classified into strategic and financial, and their bids are available. I structurally estimate valuations from all bids. The positive difference in premiums paid by strategic and financial bidders is primarily affected by the difference in dispersions of valuations (e.g., strategic but not financial bidders’ synergies are highly dispersed) and the number of bidders of each type. Contrary to common intuition, the difference in average valuations is relatively unimportant. My empirical model is general enough to help explain differences among average payments in other competitive settings with heterogeneous bidders, even when bidder data is limited.

Keywords: Asset Sales, Mergers and Acquisitions, Takeover Auctions, Bankruptcy Auctions, Heterogeneous Bidders, Strategic Bidders, Financial Bidders

Suggested Citation

Gorbenko, Alexander S., How Do Valuations Impact Outcomes of Asset Sales with Heterogeneous Bidders? (August 04, 2017). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2901789 or http://dx.doi.org/10.2139/ssrn.2901789

Alexander S. Gorbenko (Contact Author)

University College London - Department of Economics and School of Management ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

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