Buyouts under the threat of preemption
Tarsalewska, M
Date: 31 January 2018
Journal
Journal of Banking and Finance
Publisher
Elsevier
Publisher DOI
Abstract
This paper analyses the effects of preemption fears on the buyout efficiency when firms
combine non-synergistic operational activities and have asymmetric access to financing.
Bidders with preemption fears are more likely to acquire target firms at an earlier
development stage. However, if uncertainty is high, an acquirer may opt ...
This paper analyses the effects of preemption fears on the buyout efficiency when firms
combine non-synergistic operational activities and have asymmetric access to financing.
Bidders with preemption fears are more likely to acquire target firms at an earlier
development stage. However, if uncertainty is high, an acquirer may opt to wait and
buy the target firm at a later stage as assets in place. The fear of preemption affects the
efficient exercise of each offer differently. While the timing of a hostile takeover under
threat of preemption converges to an efficient global optimiser threshold, negotiated
mergers are exercised inefficiently too early. Premiums to the target firm are higher
when the firm is acquired at an earlier stage, and when the bidder fears being preempted.
Finance and Accounting
Faculty of Environment, Science and Economy
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