Deal Initiation in Mergers and Acquisitions

Determinants and shareholder wealth effects of the sales method in acquisitions

“…Masulis and Simsir (2013) show that target deal initiation is associated with lower announcement abnormal returns and link this finding to information asymmetries concerning the quality of target firms. Xie (2010) argues that bidder initiation reveals the selling firm's bargaining power, but also the bidder's valuation, which result in higher premiums.…”

“…We obtain similar results when we replace the sales method with the number of bidders contacted. This suggests that auctions serve to induce competition from bidders because targets experience attractive economic performance, but given their financial constraints, may be searching for a bidder who is able to finance their internal growth opportunities (Masulis and Simsir, 2013;Fidrmuc and Xia, 2014). The determinants for deal initiation are similar to the determinants of the sales method, which suggests alignment of incentives between deal initiation and the sales method.…”

Private Information Implications for Acquirers and Targets in Horizontal Mergers

“…This network centrality in product markets and supply chains is akin to a symmetric distribution of information. Masulis (2015) have created an information asymmetry factor structure that is robust and shows the impact of private information available in Financial and company information. However limited, this knowledge measure can work into current data and probably explain some of the expectations of acquirers from creating an M&A deal canvas and converting such opportunity.…”

“…In Masulis (2015) they create a measure to proxy for the information asymmetry in the markets for corporate control. We consider measures used in the literature, such as target idiosyncratic volatility, target size, target R&D expenses, indicator for intra-industry deals, target tangibility, target abnormal accruals and the distance between merging firm headquarters and Using factor analysis create a single information asymmetry factor that captures a significant portion of the common variability among these variables.…”

Divisional buyouts by private equity and the market for divested assets

“…Hence, sellers invariably have a strong incentive to foster competition among potential buyers, including both strategic and private equity bidders. By contrast, only a minority of mergers and takeovers are seller-initiated, and there is a richer choice set of selling mechanisms (Boone and Mulherin, 2007;Fidrmuc et al, 2012;Masulis and Simsir, 2015). 7 Two, unlike mergers and takeovers, in corporate asset sales there is no shareholder involvement nor any concern about shareholder litigation or judicial second guessing as to the merits of a transaction.…”