Working Paper Series
Mergers by Partial Acquisition
Abstract: This paper evaluates partial acquisition strategies. The
model allows for buying a share of a firm before the actual acquisition
takes place. Holding a share in a competing firm before the acquisition of
another firm, outsider-toehold, eliminates the insiders' dilemma, i.e.
profitable mergers do not occur. This strategy may thus be more profitable
for a buyer than acquiring entire firms at once. Furthermore, the insiders'
dilemma arises from the assumption of a positive externality on the
outsider firm and acquiring an outsider-toehold is thus a signal of an
Keywords: Acquisition; Antitrust; Insiders' Dilemma; Mergers; Toeholds; (follow links to similar papers)
JEL-Codes: G34; L12; L13; L41; (follow links to similar papers)
23 pages, October 20, 2004
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