The economics of club bidding and value creation

Robert Marquez and Rajdeep Singh ()

Journal of Financial Economics, 2013, vol. 108, issue 2, 493-505

Abstract: Many acquisitions are conducted by clubs, i.e., coalitions of acquirers that submit a single bid. We present a novel analysis of club bidding where the club creates value by aggregating, at least partially, bidders' values. We show that club formation can lead to higher acquisition prices when the number of bidders is exogenously fixed and large. However, when entry costs require bidders to optimize their participation decisions, club formation acts as an endogenous limit on competition and reduces the target's premium. In contrast, social efficiency with club bidding is always higher. Our findings can reconcile the contradictory evidence on club bidding.

Keywords: Club bidding; Joint bidding; Mergers and acquisitions; Takeover auctions; Private equity (search for similar items in EconPapers)
JEL-codes: D44 G24 G34 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:108:y:2013:i:2:p:493-505

DOI: 10.1016/j.jfineco.2012.12.001

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