Mergers as Auctions
AbstractMost 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 firmsâ characteristics and final bids, we propose a structural approach to infer acquirersâ gains from merging by interpreting a merger as an auction. Using nonparametric methods, we estimate biddersâ private values for targets and informational rents. We provide evidence of significant and positive merging gains. Moreover, investigating for the source of biddersâ private valuation and informational rents, our empirical analysis supports the synergy hypothesis as a motive in horizontal mergers.
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Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 461.
Date of creation: Apr 2007
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Other versions of this item:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-27 (All new papers)
- NEP-CFN-2007-08-27 (Corporate Finance)
- NEP-COM-2007-08-27 (Industrial Competition)
- NEP-GTH-2007-08-27 (Game Theory)
- NEP-IND-2007-08-27 (Industrial Organization)
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