IDEAS home Printed from https://ideas.repec.org/p/grf/mtpaps/vb006.html
   My bibliography  Save this paper

Tender offers and gains division : an analysis of the bidder’s bargaining power

Author

Listed:
  • Bessière, Véronique

Abstract

This paper investigates the impact of the bargaining power of the acquiring company on the division of gains between the two firms, and particularly its capacity to retain a high part of the created value. Our experimental hypotheses are based on theoretical models which explain the tender offer process as a game between the bidder and the target. The different models analyse two aspects of the problem : (1) the relation between the bidder and the target shareholders, which define a minimum acceptable price, particularly taking into account the free-rider problem, and (2) the relation between the bidder and potential competitors, which explain how the initial bidder can avoid competition and thus define a pre-emptive optimal strategy. For our sample, the total gain is FF687 million per operation : FF241 million for the acquirer and FF446 million for the target. It is found that the bargaining power of the bidder is stronger when the acquisition is highly synergistic : in this case the acquirer can retain a higher part of the total gains. Its power on the target’s shareholders can also be increased by different incitative mechanisms. For our sample, two of them have a significant postive impact on the bidder’s abnormal returns : the fraction of the target shares controlled prior to the acquisition (as in Schleifer and Vishny’s model), and the threat of minority shareholders’dilution (as in Grossman and Hart’s model). In opposition to several models and previous studies, the method of payment has a non significant impact on the bidder’s abnormal returns.

Suggested Citation

  • Bessière, Véronique, 1999. "Tender offers and gains division : an analysis of the bidder’s bargaining power," Accepted Papers Series 1999-1, Montpellier University, Center for Research in Finance.
  • Handle: RePEc:grf:mtpaps:vb006
    Note: article in french language
    as

    Download full text from publisher

    File URL: http://www.fsa.ulaval.ca/fineco/Bessiere.pdf
    Download Restriction: no

    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:vb006. 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.