Date of Award
Economics and Finance
Mukherjee, Tarun; Krishnaswami, Sudha
A merger requires at least one of two separate yet equally important sets of negotiations. The first involves merging parties to discuss issues related to the terms of the merger, including target firm's valuation. The second resolves disputes between the merging parties and the government regulatory agency over the potential anticompetitive impact of the merger. In the first essay, I investigate the probability of completing an acquisition deal conditional on the government approval by applying a nested logit model. My results support the findings of Eckbo (1985), Coate, Higgins, and McChesney (1990), and Coate (2005) that mergers that are expected to increase market concentration are more likely to be challenged by the government. Consistent with Officer (2003) and Bates and Lemmon (2003), I find that including target termination fees is significantly positively related to the probability of completion irrespective of whether the deal is challenged or not. However, I document that including target termination fees deters competitive bidding only if the deal was challenged and leads to higher bid premium to the target firm only if the deal was not challenged. Conditional on not being challenged, acquirer's investment opportunities and the relative size of acquirer and target firms are significantly positively related to the probability of completion, while target investment opportunities and the existence of multiple bidders are significantly negatively related to the probability of completion. Conditional on the merger being challenged, acquirer's investment opportunities and the existence of target termination fees are positively related to the probability of completion and only the existence of multiple bidders is negatively related to the probability of completion. In the second essay, I study the impact of asset sales on the firm's focus level, information asymmetry, and operating performance. I find that following a merger facilitating asset sale the firm becomes more diversified, its information asymmetry increases, and its operating performance does not change while following a non merger related asset sale, the firm becomes more focused, its information asymmetry decreases, and its operating performance improves significantly.
Bino, Adel, "Essays on the Impact of Antitrust Regulation on Corporate Mergers and Divestitures" (2007). University of New Orleans Theses and Dissertations. 1074.