Takeover Contests, Toeholds and Deterrence
We consider a setting in which two potential buyers, one with a prior toehold and one without, compete in a takeover modeled as an ascending auction with participating costs. The toeholder is more aggressive during the takeover process because she is also a seller of her own shares. The non-toeholder anticipates this extra-aggressiveness of the toeholder. Thus, he is deterred from participating unless he has a high valuation for the target company. This leads to large inefficiency losses. For many configurations, expected target returns are first increasing then decreasing in the size of the toehold.
|Date of creation:||2009|
|Date of revision:|
|Publication status:||Published, Scandinavian Journal of Economics, 2009, 111, 1, 103-124|
|Note:||View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00702428|
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