Empirical evidence suggests that the majority of the benefits from a merger accrue to the target firm’s shareholders. What does this suggest about the outcome of a competitive bidding process, and what does this imply with regard to the payment strategy and bidding strategy for prospective acquirers? It suggests that the:
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A) |
target’s management is infected with pride, that the preferred payment method in competitive bidding should be stock, and that the bidder should be prepared to withdraw if the probable cost exceeds the target’s pre-merger value plus estimated synergies. | |
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B) |
winner’s curse is real, that the preferred payment method in competitive bidding should be stock, and that the bidder should be prepared to withdraw if the probable cost exceeds the target’s pre-merger value plus estimated synergies. | |
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C) |
winner’s curse is real, that the preferred payment method in competitive bidding should be cash, and that the bidder should be prepared to withdraw if the probable cost exceeds the target’s pre-merger value plus estimated synergies. | |
If the values of the bids are, on average, correct, then the winner has, by definition, overpaid. This is the winner’s curse. Since the empirical evidence suggests that the process is risky for the bidder, the form of payment should be stock so that the risk is shared with the target’s shareholders. The bidder should be prepared to withdraw if the cost exceeds maximum fair value. | 
发表于 2011-3-10 15:54
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