Takeover Contests with Asymmetric Bidders
AbstractTarget firms often face bidders that are not equally well informed, which reduces competition, because bidders with less information fear the winner's curse more. We analyze how targets should be sold in this situation. We show that a sequential procedure can extract the highest possible transaction price. The target first offers an exclusive deal to a better-informed bidder, without considering a less well-informed bidder. If rejected, the target offers either an exclusive deal to the less well-informed bidder, or a modified first-price auction. Deal protection devices can be used to enhance a target's commitment to the procedure. (JEL G34, K22, D44) Copyright 2006, Oxford University Press.
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Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 19 (2006)
Issue (Month): 4 ()
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- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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