On the determinants of the dynamic choice between mergers and tender offers

• Type: Article in International Scientific Journal
• Date: 2023

Authors

Lukas, E (Author) Other; Pereira, PJ (Author) FEP; Rodrigues, Artur (Author) FEP

Journal

Title: JOURNAL OF CORPORATE FINANCE

Vol. 83

ISSN: 0929-1199

Indexing

ISI Web of Knowledge - 0 Citations

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Other information

Authenticus ID: P-00Z-3XR

DOI: 10.1016/j.jcorpfin.2023.102489

Abstract (EN): This paper builds on recent advances in the domain of dynamic M&A option games under uncertainty and looks closer at the determinants that drive the strategic choice between mergers and tender offers. In particular, our model sheds new light in understanding the effects of uncertainty and relative size of firms on the choice of the M&A strategy. We not only show that uncertainty and relative size do impact the choice of the strategy, but we also show that the impact of uncertainty is non-monotonic. In fact, tender offers are more likely in a context of relatively low/high volatility. For intermediate uncertainty values mergers become more likely. Furthermore, the smaller/weaker the target relative to the bidder the more likely are tender offers. Additionally, our model also shows that the tender offer payoff is larger than the merger payoff, suggesting that larger combined CARs should be observed for tender offers. Our empirical study gives support to these results.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 18