Abstract
We hypothesize that macro-level liquidity affects the choice between tender-mergers and mergers. We employ a novel methodology to test this relationship. This method finds structural breaks in the number of tender-mergers relative to mergers and finds that the structural breaks coincide strikingly well with major changes in macro-level liquidity. Consistent with our hypotheses our regression analysis finds that the number of tender offers increases with liquidity and also that the acquirer’s share of synergy increases as tender-mergers increase.
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Notes
A tender-merger is an acquisition which consists of two steps. In the first step the majority of the stocks of the target firm are acquired through a tender offer. In the second step the remaining stocks are acquired through a merger.
The other major action by the Fed during this period is the decrease in Fed funds rate during 2001. This is a reaction to the bursting of the
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Baxamusa, M., Georgieva, D. Two-step acquisitions and liquidity spread. J Econ Finan 39, 262–287 (2015). https://doi.org/10.1007/s12197-012-9247-6
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DOI: https://doi.org/10.1007/s12197-012-9247-6