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Screening and Merger Activity

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  • Banal-Estanol, Albert
  • Heidhues, Paul
  • Nitsche, Rainer
  • Seldeslachts, Jo

Abstract

In our paper targets, by setting a reserve price, screen acquirers on their (expected) ability to generate merger-speci?c synergies. Both empirical evidence and many common merger models suggest that the di?erence between high- and low-synergy mergers becomes smaller during booms. This implies that the target’s opportunity cost for sorting out relatively less ?tting acquirers increases and, hence, targets screen less tightly during booms, which leads to a hike in merger activity. Our screening mechanism not only predicts that merger activity is intense during economic booms and subdued during recessions but is also consistent with other stylized facts about takeovers and generates novel testable predictions.

Suggested Citation

  • Banal-Estanol, Albert & Heidhues, Paul & Nitsche, Rainer & Seldeslachts, Jo, 2009. "Screening and Merger Activity," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 270, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:270
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    Cited by:

    1. Dertwinkel-Kalt, Markus & Wey, Christian, 2016. "Structural remedies as a signaling device," Information Economics and Policy, Elsevier, vol. 35(C), pages 1-6.
    2. Lien Duong, 2013. "Aggregate Australian Takeovers: A Review of Markov Regime Switching Models," International Review of Finance, International Review of Finance Ltd., vol. 13(4), pages 529-558, December.
    3. Shekhar, Shiva & Wey, Christian, 2017. "Uncertain merger synergies, passive partial ownership, and merger control," DICE Discussion Papers 260, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Joseph A. Clougherty & Jo Seldeslachts, 2013. "The Deterrence Effects of US Merger Policy Instruments," Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 1114-1144, October.
    5. Lien Duong & Izan H. Y. Izan, 2012. "Consequences of Riding Takeover Waves: A ustralian Evidence," International Review of Finance, International Review of Finance Ltd., vol. 12(4), pages 399-434, December.

    More about this item

    Keywords

    Takeovers; Merger Waves; Defense Tactics; Screening;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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