Corporate Takeover Targets

Introduction to Part 1

Takeover bids are considered a major instrument in organizing the economic fabric created by companies through a more efficient reallocation of assets and capital, which responds to an industrial logic of redeploying various activities within the economy [MUL 96]. Expansion through takeover bids is one of the means used by companies to carry out specialization, vertical integration or diversification strategies. Therefore, these transactions form the core of industrial and technological policies. They call to attention all economic actors – national, political, and economic authorities, the European Commission – which seek to ensure the observance of competition rules and the proper functioning of financial markets. To prevent the abuse of a dominant position (or monopoly power), companies considering a merger or acquisition are required to apply for authorization from market regulators, and thus monopolies have been, since 1890 and following the Sherman Antitrust Act, generally prevented [COM 02]. Regarding the main motivating factors behind takeover, these transactions can be used for speculative or strategic purposes. They are particularly useful when the competitive arena changes rapidly, as in periods of rapid innovation and globalization. Several studies have been carried out on their performance. What is first observed regarding these studies is the vast diversity of the results.

The aim of the first part of this book is to present the theoretical ...