News Column

Study Findings from R. Calcagno et al Provide New Insights into Corporate Finance (Competition and dynamics of takeover contests)

July 5, 2014

By a News Reporter-Staff News Editor at Investment Weekly News -- Research findings on Corporate Finance are discussed in a new report. According to news reporting from London, United Kingdom, by VerticalNews journalists, research stated, "This paper investigates the effect of potential competition on takeovers which we model as a bargaining game with alternating offers where calling an auction represents an outside option for each bidder at each stage of the game. The model describes a takeover process that is initiated by an unsolicited bidder, and it aims to answer three main questions: who wins the takeover and how? when? and how much is the takeover premium? Our results explain why the takeover premium resulting from a negotiated deal is not significantly different from that resulting from an auction, and why tender offers are rarely observed in reality."

The news correspondents obtained a quote from the research, "We also show that when the threat of the initial bidder to call a tender offer is not credible, the takeover process might end with a private auction organized by the target. Conversely, when the tender offer threat is credible, the takeover process ends with a deal negotiated bilaterally between the bidder and the target. The takeover premium always depends on the degree of potential competition, while it is affected by the target resistance only for weak initial bidders."

According to the news reporters, the research concluded: "Finally, the model allows us to draw conclusions on how other dimensions of the takeover process, such as termination fees, control benefits and tender offer costs, affect its dynamics and outcome."

For more information on this research see: Competition and dynamics of takeover contests. Journal of Corporate Finance, 2014;26():36-56. Journal of Corporate Finance can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands. (Elsevier -; Journal of Corporate Finance -

Our news journalists report that additional information may be obtained by contacting R. Calcagno, Cass Business Sch City Univ, London, United Kingdom.

Keywords for this news article include: London, Europe, United Kingdom, Corporate Finance

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Source: Investment Weekly News

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