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Crossing takeover premiums and mix of payment: An empirical test of contractual setting in M&A transactions

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  • Hubert de La Bruslerie

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

The analyses of the tender offer premiums and of the means of payment should not be performed separately. In the empirical literature, these two variables are often considered independently, although they may have an endogenous relationship in a contractual setting. Using a sample of European M&As over the 2000-2010 decade, we show that these two variables are jointly set in a contractual empirical approach. The relationship between the percentage of cash and the offer premium is positive: higher premiums yield payments with more cash. We highlight that the payment choice is not a continuum between full cash and full share payments. Two different regimes of payment in M&A transactions are empirically characterized. We analyze the major determinants of M&A terms when the offer premium and the means of payment are jointly set. The underlying rationale of an asymmetry of information and a risk-sharing calculus is found to be significant in the setting of the agreement.

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  • Hubert de La Bruslerie, 2012. "Crossing takeover premiums and mix of payment: An empirical test of contractual setting in M&A transactions," Post-Print hal-01505414, HAL.
    • Handle: RePEc:hal:journl:hal-01505414
    Note: View the original document on HAL open archive server: https://hal.science/hal-01505414v1
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    Cited by:

    1. Rouine, Ibtissem, 2018. "Target country's leadership style and bidders' takeover decisions," International Review of Financial Analysis, Elsevier, vol. 60(C), pages 17-29.
    2. Coën, Alain & de La Bruslerie, Hubert, 2019. "The informational dimensions of the Amihud (2002) illiquidity measure: Evidence from the M&A market," Finance Research Letters, Elsevier, vol. 29(C), pages 23-29.
    3. Pantisa Pavabutr, 2021. "White Knights or Machiavellians? Understanding the motivation for reverse takeovers in Singapore and Thailand," PIER Discussion Papers 153, Puey Ungphakorn Institute for Economic Research.
    4. Basnet, Anup & Davis, Frederick & Walker, Thomas & Zhao, Kun, 2021. "The effect of securities class action lawsuits on mergers and acquisitions," Global Finance Journal, Elsevier, vol. 48(C).
    5. Maung, Min & Shedden, Myles & Wang, Yuan & Wilson, Craig, 2019. "The investment environment and cross-border merger and acquisition premiums," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 19-35.
    6. Hubert Bruslerie & Jérôme Caby, 2023. "Ex-ante determinants to delist or not delist targets after an M&A," Review of Quantitative Finance and Accounting, Springer, vol. 61(4), pages 1441-1478, November.
    7. Yasmeen Akhtar & Attiya Yasmin Javid & Tariq Abbasi, 2014. "What Determines Payment Methods and Deal Amount in Corporate Merger and Acquisitions in Pakistan," PIDE-Working Papers 2014:97, Pakistan Institute of Development Economics.
    8. Simonyan, Karen, 2014. "What determines takeover premia: An empirical analysis," Journal of Economics and Business, Elsevier, vol. 75(C), pages 93-125.
    9. Giang Nguyen & Hung Pham, 2024. "Venture capital and methods of payment in mergers and acquisitions," Post-Print hal-04325755, HAL.
    10. Pantisa Pavabutr, 2020. "White Knights or Machiavellians? Understanding the motivation for reverse takeovers in Singapore and Thailand," Review of Quantitative Finance and Accounting, Springer, vol. 55(3), pages 983-1001, October.
    11. Cheng-Few Lee & Woan-lih Liang & Fu-Lai Lin & Yating Yang, 2016. "Applications of simultaneous equations in finance research: methods and empirical results," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 943-971, November.
    12. Ruichen Ma, 2023. "The sustainable development trend in environmental, social, and governance issues and stakeholder engagement: Evidence from mergers and acquisitions in China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3159-3173, November.
    13. Baldi, Francesco & Salvi, Antonio, 2022. "Disentangling acquisition premia: Evidence from the global market for corporate control," Finance Research Letters, Elsevier, vol. 48(C).

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    More about this item

    Keywords

    M&A; takeover premium; means of payment; contract setting;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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