Takeover Contests, Toeholds and Deterrence |
| |
Authors: | David Ettinger |
| |
Affiliation: | Universitéde Cergy-Pontoise, THEMA, F-95000 Cergy-Pontoise, France |
| |
Abstract: | We consider a setting in which two potential buyers, one with a prior toehold and one without, compete in a takeover modeled as an ascending auction with participating costs. The toeholder is more aggressive during the takeover process because she is also a seller of her own shares. The non-toeholder anticipates this extra-aggressiveness of the toeholder. Thus, he is deterred from participating unless he has a high valuation for the target company. This leads to large inefficiency losses. For many configurations, expected target returns are first increasing then decreasing in the size of the toehold. |
| |
Keywords: | Takeovers ascending auctions toeholds deterrence |
|
|