IDEAS home Printed from https://ideas.repec.org/p/grf/mtpaps/vb005.html
   My bibliography  Save this paper

A model of takeover price: a comparative analysis of the bidder’s strategies

Author

Listed:
  • Bessière, Véronique

Abstract

We develop a model of the takeover offer price in which the acquirer has a choice between (1) a dissuasive or minimum price, (2) a signaling or mimicking strategy, and (3) a hostile or friendly offer. This last consideration is important in France, where most of the acquisitions have previously received the agreement of the target\'s management. The takeover is modeled as an auction between two acquirers with two types (high or low synergies). The alternative strategies are specified following the perfect bayesian equilibrium requirements for signaling games. The hostile offer analysis shows principally that the dissuasive strategy is always preferred when information costs are high (the costs engaged by the bidder to know his target\'s valuation), and that the signaling strategy is not always the most profitable, even for the high type bidder. The friendly offer is modeled in a value maximisation context, and negotiation constitutes a free mechanism to obtain information, for both the target and the bidder. Consequently, this offer appears to be the equilibrium strategy as soon as information cost exists.

Suggested Citation

  • Bessière, Véronique, 1997. "A model of takeover price: a comparative analysis of the bidder’s strategies," Accepted Papers Series 1997-2, Montpellier University, Center for Research in Finance.
  • Handle: RePEc:grf:mtpaps:vb005
    Note: This paper received in 2000 the award of the best article published in \"Revue Finance\", granted by \"Revue Finance\" and the French Finance Association; article in French language
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:grf:mtpaps:vb005. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael Kaestner). General contact details of provider: http://edirc.repec.org/data/cregofr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.