Optimal Acquisition Strategies in Unknown Territories

Onur Koska and Frank Staehler
Authors registered in the RePEc Author Service: Frank Stähler

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the optimal acquisition strategy of a foreign investor, who wants to acquire one out of two local firms, under incomplete information. The response to acquisition offers is also a signal on firm productivity, affecting future competition. We identify a competition effect (firms compete for acquisition) and a revelation effect (firms reveal their productivities). These effects reduce the rejection profits and increase the acceptance probability. If the investor makes simultaneous offers, the revelation effect is a potential threat because a firm may signal low productivity, but may not be acquired. If, however, the investor makes offers sequentially, this threat does not exist, making sequential offers the optimal acquisition strategy.

Keywords: Multinational Firms; Acquisition; Incomplete Information (search for similar items in EconPapers)
JEL-codes: F23 G34 (search for similar items in EconPapers)
Date: 2014-04-14
New Economics Papers: this item is included in nep-bec, nep-com and nep-cse
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in Journal of Institutional and Theoretical Economics 3.170(2014): pp. 406-426

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Journal Article: Optimal Acquisition Strategies in Unknown Territories (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:68196

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