How Do Valuations Impact Outcomes of Asset Sales with Heterogeneous Bidders?
57 Pages Posted: 23 Jan 2017 Last revised: 16 Aug 2017
Date Written: August 04, 2017
Differences among bidder type-specific outcomes of asset sales that attract multiple types of bidders are theoretically related to differences in their average valuations, valuation dispersions, and participation. The lead application to quantify these relationships is takeover auctions: bidders are classified into strategic and financial, and their bids are available. I structurally estimate valuations from all bids. The positive difference in premiums paid by strategic and financial bidders is primarily affected by the difference in dispersions of valuations (e.g., strategic but not financial bidders’ synergies are highly dispersed) and the number of bidders of each type. Contrary to common intuition, the difference in average valuations is relatively unimportant. My empirical model is general enough to help explain differences among average payments in other competitive settings with heterogeneous bidders, even when bidder data is limited.
Keywords: Asset Sales, Mergers and Acquisitions, Takeover Auctions, Bankruptcy Auctions, Heterogeneous Bidders, Strategic Bidders, Financial Bidders
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