Strategic and Financial Bidders in Takeover Auctions

74 Pages Posted: 3 Mar 2010 Last revised: 2 Apr 2014

See all articles by Alexander S. Gorbenko

Alexander S. Gorbenko

University College London - Department of Economics and School of Management

Andrey Malenko

University of Michigan, Stephen M. Ross School of Business; Centre for Economic Policy Research (CEPR)

Date Written: April 1, 2014

Abstract

Using data on auctions of companies, we estimate valuations (maximum willingness to pay) of strategic and financial bidders from their bids. We find that a typical target is valued higher by strategic bidders. However, 22.4% of targets in our sample are valued higher by financial bidders. These are mature poorly-performing companies. We also find that (i) valuations of different strategic bidders are more dispersed, (ii) valuations of financial bidders are correlated with aggregate economic conditions. Our results suggest that different targets appeal to different types of bidders, rather than that strategic bidders always value targets more because of synergies.

Keywords: Mergers and Acquisitions, Strategic Bidders, Financial Bidders, Takeover Auctions

JEL Classification: D44, G32, G34

Suggested Citation

Gorbenko, Alexander S. and Malenko, Andrey, Strategic and Financial Bidders in Takeover Auctions (April 1, 2014). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1559481 or http://dx.doi.org/10.2139/ssrn.1559481

Alexander S. Gorbenko

University College London - Department of Economics and School of Management ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

Andrey Malenko (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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