Columbia Law School
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Contractual Remedies in Mergers: Lessons from Crispo v. Musk
What remedy should a target be entitled to get from a breaching buyer in a merger transaction? This seemingly straightforward question has surprisingly vexed M&A practitioners and judges over the years.
With a public target, the buyer typically promises to …
How Investment Banks’ Disagreement over Valuation Contributes to the Winner’s Curse
The well-developed theory of the winner’s curse can potentially explain the poor performance of mergers and acquisitions (Roll, 1986). A key reason for the curse is the uncertainty concerning a deal’s value (e.g., Capen, Clapp, and Campbell, 1971; Bazerman and …
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 …
Deal Initiation in Mergers and Acquisitions
Contrary to common belief, M&A transactions are not overwhelmingly initiated by acquirers. Target managers frequently put their firms up for sale before receiving any unsolicited bids. In fact, in our sample of U.S. domestic M&A deals completed between 1997 and …
Feedback Effect of Disclosure Spillovers
Prior research has documented the existence of disclosure externalities, or information spillovers, between firms in a number of different settings. The idea is that when two firms are economically related, public disclosures by one firm can affect the stock price …
How Enforcement Quality Affects the Use of M&A Earnouts
In mergers and acquisitions (M&A), one of the trickiest tasks is assessing the value of the company to be purchased or sold. While in some cases buyers and sellers come easily to an agreement, in others the information asymmetry between …
The Value of Unicorns and “Worthless” Companies Explained
In a new paper, “Worthless Companies,” I explain how companies with worthless assets can have substantial equity value on efficient markets and debt that trades near par, so long as an irrational bidder may acquire the company.
Consider a firm …
How U.S. and UK Deal Structures Protect Minority Shareholders
Takeover transactions are often the most significant activity affecting corporations and their shareholders. Accordingly, there are intense debates about the value and impact of takeovers and the extent to which law should regulate such transactions. One area of focus for …
Can Investors Anticipate Post-IPO Mergers and Acquisitions?
Of the nearly 6,000 U.S. firms that conducted initial public offerings between 1980 and 2008, 38 percent became merger bidders within three years after the IPO and 12 percent became takeover targets. It is important that investors understand these developments, …
