Bidding

About: Bidding is a research topic. Over the lifetime, 15371 publications have been published within this topic receiving 294233 citations. The topic is also known as: competitive bidding.

Preemptive Bidding and the Role of the Medium of Exchange in Acquisitions

Abstract: The medium of exchange in acquisitions is studied in a model where (i) bidders' offers bring forth potential competition and (ii) targets and bidders are asymmetrically informed. In equilibrium, both securities and cash offers are observed. Securities have the advantage of inducing target management to make an efficient accept/reject decision. Cash has the advantage of serving, in equilibrium, to "preempt" competition by signaling a high valuation for the target. Implications concerning the medium of exchange of an offer, the probability of acceptance, the probability of competing bids, expected profits, and the costs of bidders are derived. IN STRUCTURING ITS OFFER to acquire a firm, an acquirer must, among other things, determine the medium of exchange of the offer. That is, an acquirer must choose whether the payment will be in the form of cash, debt, equity, or some combination. With symmetric information, no transactions costs, and no taxes, the medium of exchange is irrelevant. This is not the case, though, if these assumptions are not satisfied. This paper studies the role of the medium of exchange in acquisitions in a setting in which there is asymmetric information between a target and competing bidders. The focus of the paper is on the role of the medium of exchange in preempting competition. Consider a bidder that studies the profitability of an acquisition. If it makes a bid, other potential bidders will observe the bid, learn of the potentially profitable acquisition, and perhaps compete for it. A preemptive bid may be a way to eliminate this competition. Suppose a competing bidder's expected payoff is decreasing in the initial bidder's valuation for the target. When bidding against an initial bidder with a high valuation, a competitor may face a low probability of winning the bidding and a low expected payoff given that it does win. In this case, if the initial bidder could signal a sufficiently high valuation, it could deter the competition. As Fishman [7] and P'ng [18] have shown, a high bid can signal a high valuation and thus serve to preempt competition. Both studies, however, deal only with cash offers. (See also Giammarino and Heinkel [9] and Khanna [14].) A key difference between a cash offer and a (risky) securities offer is that a security's value depends on the profitability of the acquisition, while the value of cash does not. In the studies cited above, bidders, but not the target, have private

Decoupling CEO Wealth and Firm Performance: The Case of Acquiring CEOs

Abstract: We explore how compensation policies following mergers affect a CEO's incentives to pursue a merger. We find that even in mergers where bidding shareholders are worse off, bidding CEOs are better off three quarters of the time. Following a merger, a CEO's pay and overall wealth become insensitive to negative stock performance, but a CEO's wealth rises in step with positive stock performance. Corporate governance matters; bidding firms with stronger boards retain the sensitivity of their CEOs' compensation to poor performance following the merger. In comparison, we find that CEOs are not rewarded for undertaking major capital expenditures.

Factors influencing wealth creation from mergers and acquisitions: A meta‐analysis

Abstract: This study analyzes the empirical literature concerning the influence of various factors on shareholder wealth creation in mergers and acquisitions using a multivariate framework. Overall, results indicate that while the target firm's shareholders gain significantly from mergers and acquisitions, those of the bidding firm do not. Findings also indicate that the use of stock financing has a significant impact on the wealth of both the target and bidding firms' shareholders. The presence of multiple bidders and the type of acquisition influence the bidders' return, while regulatory changes and tender offers influence the targets' returns. The paper also provides a comparison of our findings with that of previous narrative reviews and discusses their implications from the viewpoint of managers and researchers.

Returns to bidding firms in mergers and acquisitions: Reconsidering the relatedness hypothesis

Abstract: Recent work has suggested that mergers or acquisitions between strategically related firms will generate abnormal returns for shareholders of bidding firms. Empirical evidence on this hypothesis has been mixed. The relatedness hypothesis is refined by arguing that relatedness is not a sufficient condition for acquiring firms to earn abnormal returns. Rather, only when bidding firms enjoy private and uniquely valuable synergistic cash flows with targets, inimitable and uniquely valuable synergistic cash flows with targets, or unexpected synergistic cash flows, will acquiring a related firm result in abnormal returns for the shareholders of bidding firms.

An implementation of the contract net protocol based on marginal cost calculations

Abstract: This paper presents a formalization of the bidding and awarding decision process that was left undefined in the original contract net task allocation protocol This formalization is based on marginal cost calculations based on local agent criteria In this way, agents having very different local criteria (based on their selfinterest) can interact to distribute tasks so that the network as a whole functions more effectively In this model, both competitive and cooperative agents can interact In addition, the contract net protocol is extended to allow for clustering of tasks, to deal with the possibility of a large number of announcement and bid messages and to effectively handle situations, in which new bidding and awarding is being done during the period when the results of previous bids are unknown The protocol is verified by the TRACONET (TRAnsportation Cooperation' NET) system, where dispatch centers of different companies cooperate automatically in vehicle routing The implementation is asynchronous and truly distributed, and it provides the agents extensive autonomy The protocol is discussed in detail and test results with real data are presented