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Mergers as Auctions

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Author Info
Ivaldi, Marc
Motis, Jrissy

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Abstract

Most empirical studies that evaluate motives and gains in M&A conclude that acquirers at best do not lose from the deal while targets obtain positive gains. With a database containing merging firms’ characteristics and final bids, we propose a structural approach to infer acquirers’ gains from merging by interpreting a merger as an auction. Using nonparametric methods, we estimate bidders’ private values for targets and informational rents. We provide evidence of significant and positive merging gains. Moreover, investigating for the source of bidders’ private valuation and informational rents, our empirical analysis supports the synergy hypothesis as a motive in horizontal mergers.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6434.

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Date of creation: Aug 2007
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Handle: RePEc:cpr:ceprdp:6434

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Related research
Keywords: auctions corporate finance event studies merger

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Find related papers by JEL classification:
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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  17. Joseph Farrell & Carl Shapiro, 2001. "Scale Economies and Synergies in Horizontal Merger Analysis," Industrial Organization 0012002, EconWPA, revised 05 Jan 2001. [Downloadable!]
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  19. Pinkse, Joris & Slade, Margaret E., 2004. "Mergers, brand competition, and the price of a pint," European Economic Review, Elsevier, vol. 48(3), pages 617-643, June. [Downloadable!] (restricted)
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  21. Shleifer, Andrei & Vishny, Robert W, 1988. "Value Maximization and the Acquisition Process," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 7-20, Winter. [Downloadable!] (restricted)
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  23. Molnar, Jozsef, 2007. "Pre-emptive horizontal mergers: theory and evidence," Research Discussion Papers 17/2007, Bank of Finland. [Downloadable!]
    Other versions:
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