Hostile versus friendly takeovers

Monika Schnitzer ()

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: The paper analyses the choice of a raider between a hostile and a friendly takeover. If the target company’s manager has private information about the scope for efficiency gains, it is shown that the raider may prefer a hostile acquisition even if transaction costs for a friendly takeover are much smaller. The raider actually chooses between a (hostile) tender offer to uninformed shareholders and (friendly) merger negotiations with the informed manager. I show how the uncertainty about potential efficiency gains, the manager’s preference for control, the number of shares held by the manager and transaction costs affect the raider’s choice.

Date: 1996
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Citations: View citations in EconPapers (13)

Published in Economica 249 63(1996): pp. 37-55

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:19895

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