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- Title
Hostile versus Friendly Takeovers.
- Authors
Schnitzer, Monika
- Abstract
The article analyses the takeovers of companies from the target company and raiders' point of view. The choice of a raider between a hostile and a friendly takeover, if the target company's manager has private information about the scope for efficiency gains, it is shown that the raider may prefer a hostile acquisition even if transaction costs for a friendly takeover are much smaller. The analysis focused on the role of the incumbent manager who has some private information about the potential efficiency increase after the takeover. The raider has to decide whether to deal directly with shareholders by making a hostile tender offer without consulting the incumbent management, or to bargain with the manager under asymmetric information. It has been shown that an important cost of friendly takeovers is that the manager has to be paid an information rent in order to give his consent. These findings seem to be consistent with the existing empirical evidence.
- Subjects
MERGERS &; acquisitions; TENDER offers; TARGET companies; TRANSACTION costs; STOCKHOLDERS; SALE of business enterprises
- Publication
Economica, 1996, Vol 63, Issue 249, p37
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2554633