Determinants and shareholder wealth effects of the sales method in acquisitions

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...

Full description

Saved in:
Bibliographic Details
Published inJournal of banking & finance Vol. 59; pp. 469 - 485
Main Authors Schlingemann, Frederik, Wu, Hong
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.10.2015
Elsevier Sequoia S.A
Subjects
Acquisitions
Acquisitions & mergers
Auctions
Bidders
Negotiations
Rates of return
Sales method
Shareholders wealth
Studies
Acquisitions
G34
Auctions
G30
Sales method
Negotiations
Online AccessGet full text

Cover

More Information
Summary: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.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2015.06.017