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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 - 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.

Suggested Citation

  • Hubert De La Bruslerie, 2013. "Crossing takeover premiums and mix of payment: An empirical test of contractual setting in M&A transactions," Post-Print halshs-00937550, HAL.
  • Handle: RePEc:hal:journl:halshs-00937550 DOI: 10.1016/j.jbankfin.2013.01.037 Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00937550
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    References listed on IDEAS

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    1. Martin, Kenneth J, 1996. " The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership," Journal of Finance, American Finance Association, vol. 51(4), pages 1227-1246, September.
    2. Marc Goergen & Luc Renneboog, 2004. "Shareholder Wealth Effects of European Domestic and Cross-border Takeover Bids," European Financial Management, European Financial Management Association, vol. 10(1), pages 9-45.
    3. Lucian Arye Bebchuk, 1994. "Efficient and Inefficient Sales of Corporate Control," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 957-993.
    4. repec:dau:papers:123456789/8919 is not listed on IDEAS
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    Cited by:

    1. 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.
    2. Simonyan, Karen, 2014. "What determines takeover premia: An empirical analysis," Journal of Economics and Business, Elsevier, vol. 75(C), pages 93-125.

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    Keywords

    M&A; takeover premium; means of payment; contract setting;

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