Acquisition Values and Optimal Financial (In)Flexibility

• 成果类型: Article
• 署名作者: Hege, Ulrich; Hennessy, Christopher
• 署名单位: Hautes Etudes Commerciales (HEC) Paris; University of London; London Business School
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhq017
• 发表日期: 2010
• 页码: 2865
• 关键词: product market competition; capital structure; debt; INVESTMENT; AGENCY; FIRMS; determinants; BONDHOLDERS; decisions; takeover

摘要

This article analyzes optimal financial contracts for an incumbent and potential entrant accounting for prospective asset mergers. Exercising a first-mover advantage, the incumbent increases his share of surplus by issuing public debt that appreciates in the event of merger. Incumbent debt reduces the equilibrium value of entrant assets and thus reduces the return to (likelihood of) entry through two channels: venture capitalists recover less in default and ownership rights provide weaker managerial incentives. High incumbent leverage has a countervailing cost, since the resulting debt overhang prevents ex post efficient mergers if merger surplus is low. Event risk covenants limiting counterparty debt are optimal for the incumbent, further limiting the entrant's share of merger surplus. A poison-put covenant is also optimal for the incumbent, allowing him to extract the same surplus with lower debt face value. (JEL G32, G34)