Hostile Versus Friendly Takeovers
AbstractThe paper analyzes the optimal decision of a raider who can choose between a hostile and a friendly takeover. Empirical evidence shows that the transaction costs of a hostile takeover are much higher than those of a friendly one. The question therefore arises why a raider should ever wish to engage in a hostile takeover. The central argument of the paper rests on the assumption that shareholders have less information about the true value of their firm than the incumbent management. A raider might prefer to make a hostile tender offer directly to the uninformed shareholders rather than negotiating with the informed management even if the transaction costs are higher. The analysis shows furthermore how shareholders can use golden parachutes and poison pills to improve their expected payoffs in a case of takeover.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 297.
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- Andrew P. Dickerson & Heather D. Gibson & Euclid Tsakalotos, 1998.
"Takeover Risk and the Market for Corporate Control: The Experience of British Firms in the 1970s and 1980s,"
Studies in Economics
9803, Department of Economics, University of Kent.
- Dickerson, Andrew P. & Gibson, Heather D. & Tsakalotos, Euclid, 2002. "Takeover risk and the market for corporate control: the experience of British firms in the 1970s and 1980s," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1167-1195, October.
- Mohd, Irfan, 2010. "The Role of Executives in Hostile Takeover Attempts," MPRA Paper 22123, University Library of Munich, Germany, revised 15 Apr 2010.
- Mohd Irfan, 2011. "The role of executives in hostile takeover attempts," Journal of Economic Interaction and Coordination, Springer, vol. 6(1), pages 29-40, May.
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