MERGERMICROSTRUCTURE

Microstructure of Takeover Markets

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 Obiettivo del progetto (Objective)

'This project aims to contribute to the financial M&A literature by analyzing the microstructure of corporate takeovers. The primary tool used in this project for examining the merger process is the concept of deal initiation. Recent research shows that there is a significant difference between buyer-initiated deals and seller-initiated deals. In buyer-initiated deals, buyer firms contact target firms and propose takeovers even though target firm managers and shareholders have no prior intentions of selling their firms. In seller-initiated deals, target firm managers and shareholders decide to put their firms up for sale, and contact potential buyers for that purpose. The first objective of this project is to analyze the relationship between deal initiation and competition in mergers. We aim to answer the following questions: How does the number of buyer firms competing to acquire targets differ in buyer-initiated and in seller-initiated deals? Do buyer firms prevent outside competition by offering high premiums to target firms? The second objective is to analyze managerial incentives during the merger process. Merging firm CEOs receive compensation when mergers consummate, which might lead them involve in deals that are value decreasing from shareholders’ perspective but income generating from their perspective. We aim to answer the following questions: Do target firm managers initiate deals and sell their firms in order to maximize their own benefits? How do their compensations differ across initiation groups? The final objective is to analyze the relationship between earnings management and deal initiation. Recent research shows that acquirers engage in earnings management practices, especially in stock-for-stock mergers. We aim to answer the following questions: Is earnings management by target firms more prevalent in seller-initiated deals? Do acquirers manage earnings first, so that the financials of their firms look much stronger, and then initiate deals?'

Introduzione (Teaser)

European researchers joined forces to explore and contribute to the literature on financial mergers and acquisitions, by analysing the microstructure of corporate takeovers.