M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Wednesday, July 3, 2013

Getting the highest price possible

No surprise to me or anyone thinking about the auction literature, from QZ.com

Generally thought of as unwritten sell-side tactics, the relationships between the total number of bids, the designation of the deal as ‘hostile or not was studied in detail in 2001 by Andrade, Mitchell, and Stafford (“New Evidence and Perspectives on Mergers,” Journal of Economic Perspectives. 15:2, 103-120).

The figure below is developed by Andrade, Mitchell, and Stafford as examined in a chapter of Masterminding the Deal (August 2013):
  1973-1979 1980-1989 1990-1998 1973-1998
Premium (Median) 47.2% 37.7% 34.5% 37.9%
Bids/Deal 1.6 1.6 1.2 1.4
All Cash 38.3% 45.3% 27.4% 35.4%
Own Industry 29.9% 40.1% 47.8% 42.1%
Hostile Bid* at any point 8.4% 14.3% 4.0% 8.3%
N 789 1,427 2,040 4,256

...

The above exhibit suggests that in order to extract the highest price, sellers should seek to both expand the total number of prospective bidders and also the number oftimes that each suitor submits a separate bid—the separate and identifiable “bid cycles” of today’s tactics.

Want to get the highest price?  Get lots of bidders.

-bjmq

http://lawprofessors.typepad.com/mergers/2013/07/getting-the-highest-price-possible.html

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Comments

Good stuff here to explain a fundamental truth. Thanks for the stats.

Posted by: Steven J Fromm | Jul 9, 2013 5:52:51 AM

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