Online Appendix for 'Seller Debt in Acquisitions of Private Firms: A Security Design Approach'
68 Pages Posted: 21 Apr 2021 Last revised: 18 Jul 2023
Date Written: May 7, 2023
This appendix describes the related literature and provides derivations and additional results for "Seller Debt in Acquisitions of Private Firms: A Security Design Approach." Section A describes additional related literature. Sections B, C, and D provide additional results that were not established in the main text. Section E shows that almost all common "textbook" distributions satisfy the ratio condition (i.e., Assumption 4 when they satisfy the MLR ordering assumptions (i.e., Assumptions 1 and 2). Section F considers two extensions using a simple three-point cash flow distribution model: seller debt can be optimal whenever 1) acquirers are confident about their value-add plan, and 2) sellers have private information about the compatibility of their assets with the plan.
The paper is available at https://ssrn.com/abstract=3731086
Keywords: Security design, private capital, private asset acquisition, asymmetric information, seller financing, screening equilibrium, tranching, disagreement
JEL Classification: G34, D86, D82, G32, G24
Suggested Citation: Suggested Citation