Bidder's Gain: Evidence from Termination Returns

In most cases, bidder's stock returns around merger announcement convey more information than the synergy created from the acquisition. To overcome the interpretation problem, I study the bidder's return from the perspective of deal termination. Using a hand‐collected dataset on terminated merger proposals, I investigate termination returns in deals canceled for reasons unrelated to the bidder's stand‐alone valuation. I find that bidder's gain varies significantly with the type of target acquired. Further evidence suggests that the liquidity need of private target significantly contributes to the positive gain to the bidder.     

When Organizational Justice Matters for Affective Merger Commitment

We investigate when organizational justice matters to employees’ commitment in the postacquisition process after a company is taken over in a cross‐border acquisition. Overwhelming evidence from the literature suggests that employees who are treated fairly during acquisitions are more committed to their new firms. We extend this finding by dividing organizational justice into three subdimensions: informational justice, interpersonal justice, and procedural justice. We find evidence that procedural justice is an important antecedent of affective merger commitment at an early stage of the integration period, while informational justice becomes important at a later stage. Further analysis on heterogeneity between the target firm's employees and the bidder firm's employees reveals that, immediately after the acquisition, target firm's employees value knowing where they will be at the new firm (procedural justice), while bidder firm employees are more concerned about communication and transparency (informational justice). Our results point to the importance of organizational justice in a cross‐border merger and acquisition (M&A) setting and the need for a separate study of issues related to bidder firms and target firms. © 2016 Wiley Periodicals, Inc.     

When Is One Plus One More Than Two? Theory and Evidence of Merger Motivations

We devise a neoclassical economic model that reveals the underlying motivations for mergers, without resorting to distorted firm decisions or stock market inefficiency. Using empirical analyses to verify the model's predictions, we discover that mergers are more likely in economic booms than in recessions. Furthermore, we assert that a firm with insufficient physical capital is likely a bidder in a merger, whereas a firm with large physical capital is likely a target. Our findings are largely consistent with the waves of mergers during economic booms and the theory on operational synergies.     

Mergers in Sealed versus Oral Auctions

In this paper, we study mergers in oral or second-price auctions and compare them to mergers in sealed-bid or first-price auctions. We use an adaptation of the logit qualitative choice model to characterize the underlying bidder value distributions. In second-price auctions, this model has a closed-form relationship between winning bids (prices) and the probabilities of winning (shares), and this relationship gives rise to a Herfindahl-like formula that predicts merger effects. We compare mergers in second-price auctions to mergers in first-price auctions. Despite their differences, sealed-bid merger effects are predicted by the oral Herfindahl-like formula.The source of this curious similarity is not apparent.     

How Can We Act Morally in a Merger Process? A Stimulation Based on Implicit Contracts

The intention of the article is to offer stakeholders affected by mergers a criterion from which moral arguments may be generated for the organization of each individual case. The criterion: "Any operation causing legitimate interests to suffer vital infringement should be avoided in a merger process." A vital infringement of these interests is assumed when the merger undermines unique positive opportunities or considerable impairment in the future, impossible to overcome for the person affected without an unacceptable level of difficulty. Therefore, we mainly concentrate on implicit contracts – which should be based on the principle pacta sunt servanda as well. These contracts are mandatory to run an economy that produces increasingly more knowledge-based goods.     

Determinants of cross-border M&As in Latin America

This article analyzes the determinants of cross-border M&As in the Latin American region during the period 1998-2004. Using a unique dataset of 868 Mergers and Acquisitions (M&A) events, the study focuses attention on the effect of macroeconomic and investor protection conditions in the countries where the companies reside over the likelihood of these companies participating in a cross-border M&A transaction. The study considers the effect of company-specific variables in the likelihood of going cross-border. Univariate analysis and logistic regressions strongly support the idea that better economic and business-friendly conditions in the countries where the target operates, increase the likelihood of cross-border merger. Results show that not only is the business environment in the target country important but also in the bidder country. Lower levels of property rights protection in the acquirer country negatively affect the likelihood of a cross-border deal. Finally, the likelihood of a cross-border merger increases when the target faces higher cost of funding than the acquirer's.     

Das Bestellerprinzip — Entlastung für den Mieter oder Augenwischerei?

Real estate agents (REAs) brokering rent contracts in Germany charged fees only to tenants but not to landlords until 2015. In order to relieve tenants from this burden, German law now requires REAs to only charge landlords. We suggest three reasons for why landlords’ brokerage fees are not simply passed on to tenants but declined substantially after the legal change as did the amount of brokering of rent contracts. REAs’ bargaining power declined when landlords replaced tenants as bargaining partner. Brokerage fees to be paid by tenants serve as a self-selection mechanism of long term tenants. REAs’ incentives to provide high quality decline when the price is fixed before they produce their service.     

Evidence on real gains in corporate acquisitions

This study examines the change in operating performance of firms which merge for a sample of 324 combinations which occurred between 1967 and 1987. The results indicate that the performance of the merged firms typically improved following their combination. The results are not sensitive to factors such as offer size, industry relatedness between the bidder's and the target's businesses or bidder leverage. Separately, a positive association was found between the abnormal revaluation of the firms involved around the merger and the changes in operating performance observed. We conclude that the results documented in Healy et al. (1992) for a sample of 50 large mergers which occurred during the period 1979 through mid-1984 are not sensitive to sample size or to the period they investigated. The conclusions presented provide additional support for the idea that takeovers are motivated by expectations of improved performance due to the realization of synergistic benefits.     

The organization of relational contracts: The allocation of rights in franchising

Franchising contracts are designed to bring together two kinds of entrepreneurs, the franchiser and the franchisee, and to maintain their relationship in the long run. In contrast to standard exchange contracts in law, which are specifically designed to bring about the completion of an exchange efficiently, franchise contracts are designed to make it possible for the entrepreneurs to initiate, to maintain, and to eventually terminate their relationship without dispute. The research reported in this article is an attempt to see how the dual purpose of franchising contracts are achieved. The article first describes the internal organization of franchise contracts (what we called the micro-contractual aspects) and how different kinds of rights and obligations are allocated to accomplish these multiple ends. The second part of the article provides an empirical examination of 30 franchise contracts to see if the internal organization of the contracts influence both the expansion of the franchise operations through new franchises and the amount of dispute between the two sides of franchise contracts.Every franchise contract includes a set of provisions that define the commencement, termination, and ongoing operations of franchise relations. The internal organization of franchise contracts specifies what kinds of rights and obligations are distributed to the parties and the nature of this allocation within each domain of provisions. We argue that the commencement and termination aspects of franchise contracts are usually written in order to make the relationship between the parties clear, and the contingencies specific. In these provisions, the contract is written in discrete terms in which each party's rights and duties are specifically delineated. The contractual provisions dealing with the ongoing operations and the conduct of the parties, on the other hand, cannot be made specific because it is impossible to define all the future contingencies and possible business opportunities. Under these conditions, the contract is usually written in relational terms in which each party's rights and obligations are defined in terms of powers and liabilities towards each other rather than in terms of specific duties and rights.One critical consequence of writing contracts that include powers and liabilities, however, is that it may lead to disputes and undesirable conflict that are detrimental to the success of the franchise. In order to deal with these conflicts among the parties, the contract needs to specify conflict resolution mechanisms that are an integral part of franchise contracts.These general arguments are tested with the use of 30 randomly selected franchise contracts from a diverse set of businesses. Our results show that, indeed, different parts of franchise contracts allocate rights and obligations differently and the more relational a contract becomes the more likely that it would include various dispute resolution mechanisms. We also found that the success of a franchise contract, which is measured by the number of legal disputes it generates and the growth of franchised units, is influenced by the existence of relational provisions and the explicit dispute resolution mechanisms included in the contract.We recommend that franchise contracts should be written to make the commencement and termination aspect of the relationship as discrete as possible. The operations and conduct provisions of the contract, on the other hand, should be written in relational terms to give the parties the ability to respond to changes in business conditions without renegotiating the contract.It is usually the tendency on the part of franchise lawyers to write discrete contracts that attempt to specify every conceivable contingency to avoid future disputes. We argue here that a better strategy is to limit the discrete aspects of the contract to the commencement and termination clauses and to concentrate more on the dispute resolution mechanisms that can become an integral part of the contract. Thus, we also recommend that various dispute resolution mechanisms, such as franchisee associations, franchisee councils, and third party arbitration should be set up within the contract to address the possible disputes early on rather than to wait for potentially very costly court proceedings for both parties.     

公司控制权、信息不对称与并购支付方式

本文以1998-2007年间我国沪深两市的253起并购事件为对象,从公司控制权和信息不对称角度研究了并购支付方式的影响因素,研究发现:(1)当主并方大股东的持股比例位于中间水平(30～60%)时,为避免控制权转移,主并方一般选择现金支付(包括承债支付);而当持股比例较低或较高(超出30～60%)时则更倾向于股票支付;(2)交易双方的相对规模愈小,信息不对称愈小,主并方愈倾向于采用现金支付.但交易双方是否位于相同行业,对并购支付方式选择无显著影响.研究还发现,主并方的资金实力与现金支付正相关,而财务杠杆、投资机会、有形资产等因素与并购支付方式的关系不明显.     

Horizontal Agreements and R&D Complementarities: Merger versus RJV

We study the decision of two firms within an oligopoly concerning whether to enter into a horizontal agreement to exploit complementarities between their R&D activities and if so, whether to merge or form a research joint venture (RJV). In contrast to horizontal merger and motivated by real-world evidence, we incorporate a probability that an RJV contract will fail to enforce R&D sharing. We find that a horizontal agreement always arises in equilibrium, which is consistent with empirical findings that R&D complementarities between firms positively influence the formation of horizontal agreements. The insiders’ merger/RJV choice involves a trade-off: While merger offers certainty that R&D complementarities will be exploited, it leads to a profit-reducing reaction by outsiders on the product market, where competition is Cournot. Greater contract enforceability (quality) and R&D investment costs both favour RJV. Interestingly, the insiders may choose to merge even when RJV contracts are always enforceable, and they may opt to form an RJV even when the likelihood of enforceability is negligible. We also explore the welfare implications of the firms’ merger/RJV choice.     

The sensitivity of trading to the cost of information

We examine the impact of changes in real-time data access fees on price discovery in the crude oil futures market. Specifically, we examine differences in price discovery in the West Texas Intermediate crude oil futures contracts traded on two exchanges around three events corresponding to changes in real-time data access fees. We document a decrease in price discovery following two events that increase data access costs. These findings are consistent with the theoretical predictions of Cespa and Foucault that increases in data access costs reduce the number of market participants trading on real-time data and adversely impact price discovery.     

Second Sourcing with Capacity Constrained Firms and Locked-In Buyers

I begin by surveying the motivations for second-sourcing agreements in the absence of licensing fees. I then focus on a particular motivation – that of an incumbent wanting to relax a capacity constraint. I develop a general model with buyers locked into a product, and find necessary and sufficient conditions for an incumbent to benefit from the presence of rivals without any need to sign contracts with them, in contrast with Dick (1992) and with the literature on subcontracting. I show that multiple equilibria due to the self-fulfilling expectations of rivals are possible. With regards to policy, I find that, with homogeneous buyers, a monopolist incumbent will produce where price and marginal cost coincide. I illustrate the model’s results with observations from the semiconductor industry.     

论我国企业跨国并购的战略选择

随着我国企业实力的不断增强和竞争的加剧,越来越多的企业走出国门,开展跨国并购。企业开展跨国并购有利于获取我国经济发展所需的短缺资源和企业发展所需的技术、品牌和市场。目前,国内国际形势和国家政策导向都十分有利于企业"走出去"开展跨国并购。但由于我国企业规模小、实力弱及国内外文化环境、政治经济环境差异大,企业跨国并购也面临许多障碍。我国企业跨国并购要想取得成功,必须在并购主体、目标市场、并购行业、并购对象和并购方式等方面做出正确的战略选择,同时,我国政府也需要出台一些相应的扶持和鼓励措施。     

企业兼并与边界重构:一个基于现代企业理论的分析框架

兼并是企业进行外部扩张的重要手段 ,但企业兼并本身是一把双刃剑。兼并是否能够获得理想的绩效 ,在一定程度上取决于兼并后企业的边界是否最优。本文基于现代企业理论 ,从企业的交易频率、资产专用性和契约环境三个维度分析了影响企业边界的因素 ,并进一步指出企业兼并的最终极限是企业的有效边界。由于兼并不同于企业通过自身积累而进行的扩张 ,完成兼并后的企业边界往往并不是相对有效的 ,企业必须进行边界重构。企业在综合考虑边界重构成本和政策环境的基础上 ,可以采取消除边界冗余等相应措施实施边界重构。     

Cross-Border Mergers & Acquisitions Policy in Service Markets

We provide facts showing that in service markets: (i) restrictions on foreign direct investment (FDI) are under reform, (ii) cross-border Mergers & Acquisitions dominate as the entry mode of FDI, and (iii) there is often a high market concentration. Based on these facts, we present a model for analyzing cross-border merger and acquisition policy in liberalized service markets taking into account efficiency and market power effects. Our findings suggest that a merger policy, but not a discriminatory policy towards foreigners, seems warranted. Moreover, policies ensuring competition for domestic target firms seem warranted. In this vein, harmonization of the EU takeover regulations may particularly benefit assets owners in countries with many target firms.     

An application of logit analysis to prediction of merger targets

Logit estimation is applied to predicting the probability that a given firm will be a merger target. Care is taken to account for variation in industry characteristics. The statistical performance of the model and its predictive power in a holdout sample support the approach used.     

On the Scope of Conflict in International Merger Control

In this paper, we analyze the scope for conflict between national merger control agencies which simultaneously assert jurisdictions. We consider a positive model of merger control in which market definition and the analysis of dominance are both explicitly specified. Our main finding is that conflict in international merger control is less likely to occur when economic integration is high. Hence, economic integration should alleviate rather than exacerbate conflict. In addition, we observe that conflict is more likely to arise between countries of similar market size and for moderate competition policy rules.     

A Bargaining Model of Friendly and Hostile Takeovers

A bargaining model is developed that characterizes the conditions under which a takeover will either be friendly, hostile, or unsuccessful when the target management can tilt the selling procedure toward a white knight. The conditions considered mainly involve private control benefits, toehold size, and breakup fees. Also established by the model are the conditions for an efficient takeover. The proposed framework of strong management influence on takeover outcome, an alternative modeling of hostility and the adoption of a negotiation procedure, rather than an auction setup with strong shareholder influence as in most of the existing literature, delivers new insights into the US market of corporate control, which are consistent with the available evidence.     

The Shifting Sands of Merger Enforcement at the Federal Trade Commission

This paper presents a statistical model for Federal Trade Commission merger enforcement. After reviewing the literature, economic and political variables are posited to explain bureaucratic merger decisions. Various probit models are estimated with the results suggesting that the Commission enhanced the consideration given to merger–specific efficiencies in response to exogenous pressure to increase merger enforcement. Overall, the tightening of merger policy appears to have been focused on the transactions lacking documented cost savings