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Does the Toehold Influence the Success of an M&A Transaction?

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  • Radu Ciobanu

Abstract

This study analyses whether the toehold (the target shares owned by the acquirer prior to launching a takeover bid) have a decisive role in the success of mergers and acquisition (M&A) transaction. It is well known that in any bidding process having a toehold is a significant competitive advantage over the rival bidders. This study is based on the takeover bids occurred on the Romanian capital market from 2000 to 2012. Our database includes both successful and unsuccessful transaction in terms of the change of control and companies operating in every industry. Other results suggest that the toehold can play an important role in a successful M&A transaction, but also that the toehold is influenced by other factors and by the industry of the acquired company.

Suggested Citation

  • Radu Ciobanu, 2014. "Does the Toehold Influence the Success of an M&A Transaction?," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(1), pages 235-239, January.
    • Handle: RePEc:hur:ijaraf:v:4:y:2014:i:1:p:235-239
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    References listed on IDEAS

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    1. Betton, Sandra & Eckbo, B Espen, 2000. "Toeholds, Bid Jumps, and Expected Payoffs in Takeovers," Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 841-882.
    2. Cassiman, Bruno & Colombo, Massimo G. & Garrone, Paola & Veugelers, Reinhilde, 2005. "The impact of M&A on the R&D process: An empirical analysis of the role of technological- and market-relatedness," Research Policy, Elsevier, vol. 34(2), pages 195-220, March.
    3. Alexander Dyck & Luigi Zingales, 2004. "Private Benefits of Control: An International Comparison," Journal of Finance, American Finance Association, vol. 59(2), pages 537-600, April.
    4. Victor DRAGOTA & Carmen LIPARA & Radu CIOBANU, 2013. "Agency Problems and Synergistic Effects in Romania: The Determinants of the Control Premium," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(2), pages 197-219, May.
    5. Eckbo, B. Espen & Langohr, Herwig, 1989. "Information disclosure, method of payment, and takeover premiums : Public and private tender offers in France," Journal of Financial Economics, Elsevier, vol. 24(2), pages 363-403.
    6. Jennings, Robert H & Mazzeo, Michael A, 1993. "Competing Bids, Target Management Resistance, and the Structure of Takeover Bids," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 883-909.
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    Cited by:

    1. Radu Ciobanu & Mircea Bahna, 2015. "The Social, Cultural and Political Factors that Influence the Level of Mergers and Acquisitions," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 5(3), pages 33-41, July.

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