How are Firms Sold?
51 Pages Posted: 2 Jan 2005
Date Written: March 2006
As measured by the number of bidders that publicly attempt to acquire a target, the takeover arena in the 1990s was not competitive. However, we develop a new measure competition based on the pre-public, private takeover process that indicates that public takeover activity is only the tip of the iceberg of actual takeover competition during the 1990s. We show a highly competitive market where half of the targets were auctioned among multiple bidders, while the remainder negotiated with a single bidder. In event study analysis, we find that the wealth effects for target shareholders are comparable in auctions and negotiations.
Keywords: Mergers and acquisitions, auction, negotiation
JEL Classification: G34, D44
Suggested Citation: Suggested Citation