Bidder Pools in Mergers and Acquisitions

Bruce I. Carlin, Tingting Liu, Micah S. Officer, Agathe Pernoud and Danni Tu

No 34846, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Allocation mechanisms in M&A deals are complex, but a main feature is that a target board controls who to invite to the sale. In a theoretical model, we show that it is optimal for the target to invite fewer potential acquirers when they are more homogeneous (i.e., when their values for the target are more correlated). Furthermore, greater correlation (and hence a smaller optimal bidder pool) yields the target a higher surplus from the sale (i.e., higher premium). We test the model empirically and show that M&A deals with smaller bidder pools are associated with higher target returns. This is not a result of synergies in the deals: the target's share of the surplus is simply higher in deals with smaller bidder pools. Finally, we show that cash deals are associated with larger, whereas stock deals have smaller, pools of bidders.

JEL-codes: G34 (search for similar items in EconPapers)
Date: 2026-02
New Economics Papers: this item is included in nep-com, nep-des and nep-mic
Note: AP CF
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w34846.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:34846

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w34846
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().