We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Predicting Successful Takeovers and Risk Arbitrage.
- Authors
Branch, Ben; Yang, Taewon
- Abstract
In this paper, we explore the probability of merger completion/success for the 1991 to 2001 period. We construct a prediction model for merger completion and, among other issues, test how payment methods/merger types can influence success for three basic types of takeover offers: cash tender, stock swap, and collar. Our multivariate test reveals that takeover attempts offering cash are more likely to succeed than those which offer payment in the form of stock. We argue that the uncertain equity values implicit in the stock payment method accounts for the reduced success rate. A range of exchange ratios (collar offers) tends to improve the chance of success as compared with a fixed exchange ratio. We find that our prediction model, based on both historical and new findings, can be used to improve the risk-adjusted returns of risk arbitrage and related strategies.
- Subjects
MERGERS &; acquisitions; PAYMENT; STOCKS (Finance); TENDER offers
- Publication
Quarterly Journal of Business & Economics, 2003, Vol 42, Issue 1/2, p3
- ISSN
0747-5535
- Publication type
Article