Regulation, taxes and the market for corporate control in Belgium

This paper examines the effect of regulation and taxation on the characteristics of the merger and acquisition process in Belgium. Regulatory provisions are reflected in the fact that Belgian bidders own large toeholds in the target before they engage in takeover bids. Although these toeholds do not have to be disclosed, bidders do not earn any significant returns as a result of the takeover. It is also found that tax considerations are important when a firm chooses to pay with cash or with shares. Finally, it is found that in negotiated offers, the gain to target firms is negatively related to the toehold of the bidder and positively related to the number of shares controlled by large block holders.