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The Art of Capital Restructuring: Creating Shareholder Value through Mergers and Acquisitions by H. Kent Baker, Halil Kiymaz

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CHAPTER 15

Merger Negotiations: Takeover Process, Selling Procedure, and Deal Initiation

NIHAT AKTAS

Professor of Finance, EMLYON Business School

ERIC DE BODT

Professor of Finance, Université Lille Nord de France

INTRODUCTION

Takeover processes include both private and public components. The private component starts with the initiation of contacts between the merging parties or parties interested in combining their activities and continues until the public announcement of the merger or takeover. The second part of the process corresponds with what is known as the public takeover process, which begins with the public announcement of the deal and ends with its consummation.

Before the publication of Boone and Mulherin (2007), finance researchers knew little about the private part of the takeover process. With its focus on the public component, the prior literature documents few public takeover auctions during the 1980s and 1990s. Most of the deals appeared ex post to be friendly negotiations between the target and the acquirer. For example, Betton, Eckbo, and Thorburn (2008) consider 35,727 takeover contest bids and report that 95 percent of their sample involves single-bid contests or “friendly” transactions with only one bidder. Only 3.4 percent of the deals in their sample entail multiple bid contests with rival bidders (i.e., public takeover auctions), and 1.6 percent generate multiple bids from a single bidder. Similar evidence appears in other research such as Schwert (2000), ...

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