Auctions For Bidders Research Articles

Determinants and Shareholder Wealth Effects of the Sales Method in M&A

We analyze the sales method for a sample of 575 acquisitions announced between 1998 and 2012 and find that targets choose auctions to maximize the target takeover premium through greater competition and to relax their financial constraints. Auctions, compared to negotiated deals, are associated with significantly higher target announcement returns, especially for relatively small targets. Bidder returns are positively related to auctions for bidders acquiring relatively small targets, not for the full sample. Taking into account size differences, we find that auctions, decrease target gains and increase bidder gains expressed in dollars.

The Effect of Profit Sharing on Auction Markets

We consider an independent private value auction environment in which bidders own passive partial claims on rival bidder's auction pro…ts. While cross ownership confers no ability to directly aect bidding behavior, claims on rival pro…ts dampen competition. When bidders hold the same aggregate level of shares in rivals in a …rst-price auction, cross ownership has an eect similar to reducing the number of bidders. A similar decrease in competition occurs in English auctions. In contrast to the well-known revenue equivalence result, when bidders own the same shares in all rival bidders, the seller prefers …rst-price auctions to English auctions.