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Discussion Paper Details

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Title: Mergers as Auctions

Author(s): Marc Ivaldi and Jrissy Motis

Publication Date: August 2007

Keyword(s): auctions, corporate finance, event studies and merger

Programme Area(s): Financial Economics and Industrial Organization

Abstract: Most empirical studies that evaluate motives and gains in M&A conclude that acquirers at best do not lose from the deal while targets obtain positive gains. With a database containing merging firms? characteristics and final bids, we propose a structural approach to infer acquirers? gains from merging by interpreting a merger as an auction. Using nonparametric methods, we estimate bidders? private values for targets and informational rents. We provide evidence of significant and positive merging gains. Moreover, investigating for the source of bidders? private valuation and informational rents, our empirical analysis supports the synergy hypothesis as a motive in horizontal mergers.

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Bibliographic Reference

Ivaldi, M and Motis, J. 2007. 'Mergers as Auctions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6434