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Bond tender offers in mergers and acquisitions

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  • Billett, Matthew T.
  • Yang, Ke

Abstract

We explore the motives and consequences of bond tender offers announced in connection with mergers and acquisitions (M&A). We find merging firms use bond tender offers strategically to renegotiate with bondholders to gain financial flexibility by reducing leverage and eliminating covenants, and to curtail the coinsurance benefits associated with M&A. Moreover, we find bondholder wealth effects depend not only on the bond's own characteristics, but also on the characteristics of its sibling bonds. Finally, the use of bond tender offers in M&A is associated with increased likelihood of deal consummation and lower acquisition premiums.

Suggested Citation

  • Billett, Matthew T. & Yang, Ke, 2016. "Bond tender offers in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 128-141.
    • Handle: RePEc:eee:corfin:v:40:y:2016:i:c:p:128-141
    DOI: 10.1016/j.jcorpfin.2016.07.013
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    Cited by:

    1. Renneboog, Luc & Vansteenkiste, Cara, 2019. "Failure and success in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 650-699.
    2. Brown, Scott & Powers, Eric, 2020. "The life cycle of make-whole call provisions," Journal of Corporate Finance, Elsevier, vol. 65(C).
    3. Murray, Benjamin & Svec, Jiri & Wright, Danika, 2017. "Wealth transfer, signaling and leverage in M&A," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 203-212.
    4. Huong N. Higgins, 2018. "Banks and Corporate Decisions: Evidence from Business Groups," Financial Management, Financial Management Association International, vol. 47(3), pages 679-713, September.

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    More about this item

    Keywords

    Mergers; Acquisitions; Bond tender offers; Coinsurance; Covenants;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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