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Hostile versus friendly takeovers

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  • Schnitzer, Monika

Abstract

The paper analyses the choice of a raider between a hostile and a friendly takeover. If the target company’s manager has private information about the scope for efficiency gains, it is shown that the raider may prefer a hostile acquisition even if transaction costs for a friendly takeover are much smaller. The raider actually chooses between a (hostile) tender offer to uninformed shareholders and (friendly) merger negotiations with the informed manager. I show how the uncertainty about potential efficiency gains, the manager’s preference for control, the number of shares held by the manager and transaction costs affect the raider’s choice.

Suggested Citation

  • Schnitzer, Monika, 1996. "Hostile versus friendly takeovers," Munich Reprints in Economics 19895, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:19895
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    Cited by:

    1. Heinrich, Ralph P., 1999. "Complementarities in Corporate Governance - A Survey of the Literature with Special Emphasis on Japan," Kiel Working Papers 947, Kiel Institute for the World Economy (IfW Kiel).
    2. Stewart Jones & David A. Hensher, 2007. "Evaluating the Behavioural Performance of Alternative Logit Models: An Application to Corporate Takeovers Research," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(7‐8), pages 1193-1220, September.
    3. Dickerson, Andrew P. & Gibson, Heather D. & Tsakalotos, Euclid, 2002. "Takeover risk and the market for corporate control: the experience of British firms in the 1970s and 1980s," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1167-1195, October.
    4. Mohd Irfan, 2011. "The role of executives in hostile takeover attempts," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 6(1), pages 29-40, May.
    5. Pierre Lasserre & Moez Souissi, 2007. "It Takes Two to Tango. La fusion : exercice de deux options réelles," Économie et Prévision, Programme National Persée, vol. 178(2), pages 51-65.
    6. Chih-Huei Banks, 2024. "Certification of acquisitions by external parties: evidence on acquirers’ banking relationships," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 48(3), pages 708-733, September.
    7. David R. King & Gang Wang & Mehdi Samimi & Andres Felipe Cortes, 2021. "A Meta‐Analytic Integration of Acquisition Performance Prediction," Journal of Management Studies, Wiley Blackwell, vol. 58(5), pages 1198-1236, July.
    8. Lukas, Elmar & Pereira, Paulo J. & Rodrigues, Artur, 2023. "On the determinants of the dynamic choice between mergers and tender offers," Journal of Corporate Finance, Elsevier, vol. 83(C).
    9. Maria Rosa Battaggion & Vittoria Cerasi, 2021. "It takes two to tango: Interlockings and Partial Equity Ownership," Working Papers 475, University of Milano-Bicocca, Department of Economics, revised Jul 2021.
    10. Offenberg, David & Pirinsky, Christo, 2015. "How do acquirers choose between mergers and tender offers?," Journal of Financial Economics, Elsevier, vol. 116(2), pages 331-348.

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