Hostile versus friendly takeovers
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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|Date of creation:||May 1991|
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