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Mergers as Auctions

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  • Ivaldi, Marc
  • Motis, Jrissy

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.

Suggested Citation

  • Ivaldi, Marc & Motis, Jrissy, 2007. "Mergers as Auctions," CEPR Discussion Papers 6434, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6434
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    Cited by:

    1. Georges Dionne & Mélissa La Haye & Anne-Sophie Bergerès, 2015. "Does asymmetric information affect the premium in mergers and acquisitions?," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 819-852, August.
    2. Dimopoulos, Theodosios & Sacchetto, Stefano, 2014. "Preemptive bidding, target resistance, and takeover premiums," Journal of Financial Economics, Elsevier, vol. 114(3), pages 444-470.

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    More about this item

    Keywords

    Auctions; Corporate finance; Event studies; Merger;
    All these keywords.

    JEL classification:

    • 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

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