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Collusive Bidding in Hostile Takeovers

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  • McAfee, R Preston, et al

Abstract

Bidders in hostile takeovers have colluded in five separate instances. It is found that these collusive agreements did not affect the target's price significantly. A model is developed to explain this observation. A welfare analysis indicates that a positive probability of cartel formation can be socially beneficial and may or may not be beneficial to the target's shareholders, depending on the process generating takeover attempts. This sheds light on the existing policy debate concerning regulations of collusive agreements. An analysis of the existing case law is provided, which indicates that such collusive arrangements are legal at present. Copyright 1993 by MIT Press.

Suggested Citation

  • McAfee, R Preston, et al, 1993. "Collusive Bidding in Hostile Takeovers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(4), pages 449-482, Winter.
    • Handle: RePEc:bla:jemstr:v:2:y:1993:i:4:p:449-82
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    References listed on IDEAS

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    1. Fishman, Michael J, 1989. " Preemptive Bidding and the Role of the Medium of Exchange in Acquisitions," Journal of Finance, American Finance Association, vol. 44(1), pages 41-57, March.
    2. Michael J. Fishman, 1988. "A Theory of Preemptive Takeover Bidding," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 88-101, Spring.
    3. Bradley, Michael, 1980. "Interfirm Tender Offers and the Market for Corporate Control," The Journal of Business, University of Chicago Press, vol. 53(4), pages 345-376, October.
    4. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-599, June.
      • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
    5. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
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    Cited by:

    1. Jun Zhang & Ruqu Wang, 2009. "The Role of Information Revelation in Elimination Contests," Economic Journal, Royal Economic Society, vol. 119(536), pages 613-641, March.
    2. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-1575, September.
    3. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.

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