Pre-Public M&A Negotiations: How Does Bidding Competition Affect Deal Outcomes?

Ample research has focused on bidding behavior and competition dynamics in mergers and acquisitions and how they affect takeover premiums, deal completion rates, and other economic outcomes (e.g., Aktas, de Bodt, and Roll (2010), Boone and Mulherin (2007, 2008), Jennings and Mazzeo (1993), Eckbo (1983), and Ruback (1983)). The analysis of changes in firm valuations around deal announcements is especially important to determining whether the market considers a deal as value-creating or value-destroying.

In a recent paper, I shed light on the private takeover process, the period between the time a deal is initiated and the date it is publicly … Read more

Entrenchment Through Discretion over M&A Contractual Provisions

Managerial entrenchment is detrimental to shareholder value (Faleye (2007), Cohen and Wang (2013), and Cohen and Wang (2017)). Managers are able to become entrenched by making specific investments whose value is higher under their watch than under that of the next-best alternative managers (Shleifer and Vishny (1989)). This value differential will be lost if shareholders replace managers who entered into such deals. As a result, those managers gain leeway to increase their compensation and exercise more discretion over firm strategy in a way that might destroy shareholder value.

In a recent article, we explore how managers who are not yet … Read more