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How Are Firms Sold?
Author(s) -
BOONE AUDRA L.,
MULHERIN J. HAROLD
Publication year - 2007
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2007.01225.x
Subject(s) - negotiation , shareholder , competition (biology) , common value auction , event study , business , event (particle physics) , microeconomics , industrial organization , monetary economics , economics , finance , corporate governance , law , ecology , paleontology , context (archaeology) , physics , quantum mechanics , political science , biology
As measured by the number of bidders that publicly attempt to acquire a target, the takeover arena in the 1990s appears noncompetitive. However, we provide novel data on the pre‐public, private takeover process that indicates that public takeover activity is only the tip of the iceberg of actual takeover competition during the 1990s. We show a highly competitive market where half of the targets are auctioned among multiple bidders, while the remainder negotiate with a single bidder. In event study analysis, we find that the wealth effects for target shareholders are comparable in auctions and negotiations.