Buyouts under the threat of preemption
Journal of Banking and Finance
© 2018 Elsevier B.V. All rights reserved.
Reason for embargo
Under embargo until 31 July 2019 in compliance with publisher policy.
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.
This project received cofunding from the European Unions Horizon 2020 research and innovation programme under the Marie Skodowska-Curie grant agreement No 665778 and National Science Center, Poland under the grant agreement 2016/23/P/HS4/04032 POLONEZ.
This is the author accepted manuscript. The final version is available from Elsevier via the DOI in this record.
Vol. 89 (2018), pp. 39-58.