The Timing and Method of Payment in Mergers when Acquirers Are Financially Constrained

Gorbenko, Alexander S.; Malenko, Andrey

doi:10.1093/rfs/hhx126

Cited by 58 publications

(15 citation statements)

References 59 publications

(53 reference statements)

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“…For example, Boone and Mulherin (2007) attempt to explain a target's choice of sale mechanism by whether the winning bidder paid in cash. But studies in the corporate finance literature have shown that method of payment depends on the winning bidder's characteristics (e.g., Travlos, 1987;Eckbo, Giammarino, Heinkel, 1990;Gorbenko and Malenko, 2017). Our analysis shows that the identity of the winning bidder-and thus its characteristics-are an outcome of the…”

Section: Accepted Manuscriptmentioning

confidence: 71%

Entry and competition in takeover auctions

Gentry

Stroup

2019

Journal of Financial Economics

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We estimate the degree of uncertainty faced by potential bidders in takeover auctions and quantify how it affects prices in auctions and negotiations. The high degree of uncertainty revealed by our structural estimation encourages entry in auctions but reduces a target's bargaining power in negotiations. In the aggregate, auctions and negotiations produce similar prices, even though auctions are preferred in takeover markets with high uncertainty, while the reverse is true for negotiations. Firm characteristics predict pre-entry uncertainty and thus are informative about the relative performance of auctions and negotiations for individual targets.

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Section: Accepted Manuscriptmentioning

confidence: 71%

Entry and competition in takeover auctions

Gentry

Stroup

2019

Journal of Financial Economics

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“…Scholars have become interested in the sources of and constraints on the financing of M&A. Examples of this research include the studies conducted by Gorbenko and Malenko (2017) and Burkart, Gromb, Mueller, and Panunzi (2014), who discuss how financial constraints and the external funding capacity may affect the bidding behavior of acquirers. Relatedly, Bates, Neyland, and Wang (2018) suggest that earnout agreements in M&A contracts provide an important source of financing for acquirers and that acquirers using earnouts tend to face tighter credit market conditions and use less debt and equity to fund M&A.…”

Section: Literature Reviewmentioning

confidence: 99%

The Pre-Deal Phase of Mergers and Acquisitions: A Review and Research Agenda

Welch

Pavićević

Keil

et al. 2019

Journal of Management

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Despite the long-standing research interest in the pre-deal phase of mergers and acquisitions, many important questions remain unanswered. We review and synthesize the extensive but rather fragmented research on this topic area in the fields of management, finance, accounting, and economics. We organize our review according to six themes, that is, deal initiation, target selection, bidding and negotiation, valuation and financing, announcement, and closure, which represent the main categories of activities performed during the pre-deal phase. Our review shows that most of the existing research relies on a rather high-level, simplified, and static conception of the pre-deal phase. On the basis of our review, we put forward a research agenda that calls for a more granular examination of individual activities and decisions, a more comprehensive analysis of the interplay among the different actors involved in the pre-deal phase, a better understanding of the role of the temporal dynamics, and the extension of the theoretical base from variance-based to process-based theorizing.

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“…Thus, the question of whether deviations from optimal leverage can have an impact on financing choices becomes central, especially given the evidence pointing to more favourable M&A outcomes in cash deals. Along these lines, acquirer returns are typically higher for cash deals (Gorbenko and Malenko, 2017), while stock offers have been linked to losses for acquirers (see e.g. Moeller et al, 2005).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

Corporate financial leverage and M&As choices: Evidence from the shipping industry

Alexandridis

Antypas

Gulnur

et al. 2020

Transportation Research Part E: Logistics and Transportation Re

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High capital intensity and reliance on debt financing are among the most prominent characteristics of the shipping industry. The corporate finance literature has documented that beyond a certain threshold, leverage can hamper a firm's ability to raise capital, and as a result, have a bearing on its corporate investment policy. The new, more restrictive, financing landscape in the shipping sector has put the management of capital structure on the spotlight as a key driver of investment policy, financial health, and thus, firm success. In this paper, we examine for the first time the link between the financing policy of shipping companies and their corporate investment decisions. We focus on the impact of deviations from target capital structure on mergers and acquisitions (M&A); an increasingly important corporate growth vehicle for shipping companies, with directly measurable outcomes. Deviations from optimal leverage display a strong association with the likelihood to consummate acquisitions, deal size, the financing method as well as the M&A outcome. Higher debt levels are shown to have a negative effect on acquisitiveness and a positive effect on the quality of corporate investment; a pattern with direct policy implications for shipping companies, their management teams, and shareholders.

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The Timing and Method of Payment in Mergers when Acquirers Are Financially Constrained

Cited by 58 publications

References 59 publications

Entry and competition in takeover auctions

Entry and competition in takeover auctions

The Pre-Deal Phase of Mergers and Acquisitions: A Review and Research Agenda

Corporate financial leverage and M&As choices: Evidence from the shipping industry

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