Holistic bidding strategies: Addressing target shareholders’ behavioral resistance in M&As

Beni Lauterbach, Blake Loriot, Yevgeny Mugerman and Joshua Shemesh

Finance Research Letters, 2025, vol. 74, issue C

Abstract: The study examines how behavioral considerations of target shareholders affect deal completion likelihood. Lauterbach, Mugerman and Shemesh (2024) show that bidders adjust their offer prices to accommodate target shareholders’ loss aversion, and we find that these premium adjustments appear to mitigate potential bid resistance. Our tests, conducted in an extensive sample of all U.S. public firm merger offers in 1990–2019, suggest a holistic pricing strategy among bidders: the offer price is based not only on intrinsic values and financial analysis; it also usually incorporates the price adjustment necessary to neutralize target shareholders’ behavioral resistance, thereby facilitating deal acceptance.

Keywords: Mergers and acquisitions; Deal completion; Reference prices; Prospect theory (search for similar items in EconPapers)
JEL-codes: G34 G41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:74:y:2025:i:c:s154461232500087x

DOI: 10.1016/j.frl.2025.106822

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