Information asymmetries how not to 'buy a lemon' in negotiating mergers and acquisitions

Ingemar Dierickx and Mitchell Koza

European Management Journal, 1991, vol. 9, issue 3, 229-234

Abstract: Companies involved in merger and acquisition deals are up against a fundamental problem when they negotiate. Information is asymmetrical, i.e. unequally divided between buyer and seller. There are two, parallel outcomes. One, the buyer is likely to make an adverse selection. Two, the seller cannot reveal all his information and true value -- he has a 'credible signalling problem'. Ingemar Dierickx and Mitchell Koza make some helpful suggestions to avoid or reduce the information imbalance when negotiations take place on combining assets. They include hints about who negotiates and over what period, degree of previous familiarity between the companies, and the use of joint ventures as a preferable alternative. Regrettably, there is no absolute 'cure'.

Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/0263237391900028
Full text for ScienceDirect subscribers only

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:eee:eurman:v:9:y:1991:i:3:p:229-234

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/115/bibliographic
http://www.elsevier. ... me/115/bibliographic

Access Statistics for this article

European Management Journal is currently edited by Michael Haenlein

More articles in European Management Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().