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Journal of Economics and Finance

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01-04-2015

Two-step acquisitions and liquidity spread

Authors: Mufaddal Baxamusa, Dobrina Georgieva

Published in: Journal of Economics and Finance | Issue 2/2015

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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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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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Title: Two-step acquisitions and liquidity spread
Authors: Mufaddal Baxamusa
Dobrina Georgieva
Publication date: 01-04-2015
Publisher: Springer US
Published in: Journal of Economics and Finance / Issue 2/2015
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI: https://doi.org/10.1007/s12197-012-9247-6

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