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Hostile versus friendly takeovers

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Author Info

  • Schnitzer,Monika

    (University of Bonn 0; 26,611,511)

Abstract

The paper analyses the choice of a raider between a hostile and a friendly takeover. If the target company’s manager has private information about the scope for efficiency gains, it is shown that the raider may prefer a hostile acquisition even if transaction costs for a friendly takeover are much smaller. The raider actually chooses between a (hostile) tender offer to uninformed shareholders and (friendly) merger negotiations with the informed manager. I show how the uncertainty about potential efficiency gains, the manager’s preference for control, the number of shares held by the manager and transaction costs affect the raider’s choice.

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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 339.

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Date of creation: May 1991
Date of revision:
Handle: RePEc:bon:bonsfa:339

Contact details of provider:
Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

Related research

Keywords: Takeovers; Signalling;

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Cited by:
  1. 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.
  2. Ralph P. Heinrich, 1999. "Complementarities in Corporate Governance. A Survey of the Literature with Special Emphasis on Japan," Kiel Working Papers 947, Kiel Institute for the World Economy.
  3. Mohd, Irfan, 2010. "The Role of Executives in Hostile Takeover Attempts," MPRA Paper 22123, University Library of Munich, Germany, revised 15 Apr 2010.
  4. 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.
  5. Moez Souissi & Pierre Lasserre, 2007. "It Takes Two to Tango. La fusion : exercice de deux options réelles," Économie et Prévision, Programme National Persée, vol. 178(2), pages 51-65.

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