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Hostile versus friendly takeovers

  • Schnitzer,Monika

    (University of Bonn,University of Cologne)

This paper analyzes 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. The author shows 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. Copyright 1996 by The London School of Economics and Political Science.

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Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 299.

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Date of creation: May 1990
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Handle: RePEc:bon:bonsfa:299
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

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