Screening and Merger Activity

Albert Banal-Estanol, Paul Heidhues (), Rainer Nitsche and Jo Seldeslachts

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: In our paper targets, by setting a reserve price, screen acquirers on their (expected) ability to generate merger-speci?c synergies. Both empirical evidence and many common merger models suggest that the di?erence between high- and low-synergy mergers becomes smaller during booms. This implies that the target’s opportunity cost for sorting out relatively less ?tting acquirers increases and, hence, targets screen less tightly during booms, which leads to a hike in merger activity. Our screening mechanism not only predicts that merger activity is intense during economic booms and subdued during recessions but is also consistent with other stylized facts about takeovers and generates novel testable predictions.

Keywords: Takeovers; Merger Waves; Defense Tactics; Screening (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-com and nep-cta
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: SCREENING AND MERGER ACTIVITY (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:270

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