Bid characteristics

Question 1

Friendly Vs Hostile

Answer 1

Greater takeover premium accruing to target shareholders (cotter et al)
Hostile - targets gain bidders lose
Hubris and winners curse = overpay

Question 2

Method of Payment

Answer 2

Targets gain more when cash (Tuch 2007)
Managers expect to raise equity in future
Dilutes share price as more outstanding stock
Targets gain less when paid in stock stock

Question 3

Cross Border Vs Domestic

Answer 3

Cross border target and bidder gain more as diversification benefits
10% for targets
1% for bidders
( Danbolt 2004)

Question 4

Bid Competition

Answer 4

Competitive - targets gain more
Winners curse = overpay (Jennings 1993)

Question 5

Focus Vs Diversified

Answer 5

Diversified - targets gain more bidders less
Targets gain as bidders pay premium to diversify