The Consequence of Takeover Methods: Schemes of Arrangement vs. Takeover Offers

Hala Alqobali () and Daniel Li
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Hala Alqobali: Department of Economics, Faculty of Economics and Administration, King Abdul-Aziz University KAU, Jeddah 22254, Saudi Arabia
Daniel Li: Department of Economics, Durham University Business School, Durham University, Durham DH1 3LE, UK

IJFS, 2022, vol. 10, issue 3, 1-15

Abstract: This paper examined the effect of two selling processes in the UK market: takeover offers and schemes of arrangement. The latter is argued to allow a bidder to acquire a target company more cheaply and easily because schemes provide a lower threshold of the target company’s shares before “squeeze-out” procedures may be used. To address potential self-selection bias arising from bidders’ ability to choose their acquisition method, the propensity score matching methodology was applied to 803 takeovers of listed-target firms from 1995–2018. The results showed that the scheme of arrangement significantly reduces the target shareholders’ gain relative to the takeover offer.

Keywords: agency costs; bid premium; propensity score matching; schemes of arrangement; takeover offers; takeover regulations; UK takeover (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
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