Takeover contests, toeholds and deterrence
Ettinger, David (2009), Takeover contests, toeholds and deterrence, The Scandinavian journal of economics, 111, 1, p. 103-124. http://dx.doi.org/10.1111/j.1467-9442.2008.01556.x
TypeArticle accepté pour publication ou publié
Journal nameThe Scandinavian journal of economics
MetadataShow full item record
Abstract (EN)We consider a setting in which two potential buyers, one with a prior toehold and one without, compete in a takeover modeled as an ascending auction with participating costs. The toeholder is more aggressive during the takeover process because she is also a seller of her own shares. The non-toeholder anticipates this extra-aggressiveness of the toeholder. Thus, he is deterred from participating unless he has a high valuation for the target company. This leads to large inefficiency losses. For many configurations, expected target returns are first increasing then decreasing in the size of the toehold.
Subjects / Keywordsdeterrence; toeholds; ascending auctions; Takeovers
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