To scheme or bid? Choice of takeover method and impact on premium

Martin Bugeja, Raymond da Silva Rosa, Izan Hy and Susan Ngan
Additional contact information
Martin Bugeja: Accounting Discipline Group, University of Technology, Sydney, Australia
Izan Hy: University of Western Australia, Australia
Susan Ngan: Murdoch University, Australia

Australian Journal of Management, 2016, vol. 41, issue 2, 212-243

Abstract: In recent years there has been an increasing use of members’ schemes of arrangement to bring about a change in corporate control. This increasing use of schemes has been criticised in public quarters on the basis that unlike takeovers, schemes are not subject to the Eggleston principles and have arguably led to target shareholders receiving lower offer prices. This study provides the first large-sample empirical evidence on differences between schemes and takeovers. We find that the likelihood of the use of schemes significantly increases when target firm ownership concentration is higher and when the bidder has a lower toehold. Scheme usage is also more likely for larger targets and bidders with higher leverage. Consistent with public criticisms of schemes, we find that after controlling for self-selection premiums in schemes are significantly lower than those in takeovers.

Keywords: Mergers and acquisitions; schemes of arrangements; takeovers (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:41:y:2016:i:2:p:212-243

DOI: 10.1177/0312896214565120

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