Sold Below Value? Why Takeover Offers Can Have Negative Premiums
Utz Weitzel and
Financial Management, 2018, vol. 47, issue 2, 421-450
Many studies have acknowledged the existence of negative offer premiums where the initial bid undercuts the target's preannouncement market price. However, this phenomenon has not been explained. Negative premiums occur frequently and are no measurement error. We demonstrate theoretically and empirically that â€œhidden earnouts,â€ where target shareholders participate in the bidder's share of joint synergies, and corrections of overvaluation explain negative premiums. We find that target shareholders profit from the consummation of a takeover even if the announced offer has a negative premium. Our theory generalizes to low positive premiums with predictive power for the bottom 25% of all premiums.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:finmgt:v:47:y:2018:i:2:p:421-450
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0046-3892
Access Statistics for this article
Financial Management is currently edited by William G. Christie
More articles in Financial Management from Financial Management Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().