Termination fees in mergers and acquisitions

• 成果类型: Article
• 署名作者: Officer, MS
• 署名单位: University of Southern California
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(03)00119-3
• 发表日期: 2003
• 页码: 431-467
• 关键词: Mergers and acquisitions; takeovers; Termination fees; Takeover premiums

摘要

The paper provides evidence on the effects of including a target termination fee in a merger contract. I test the implications of the hypothesis that termination fees are used by self-interested target managers to deter competing bids and protect sweetheart deals with white knight bidders, presumably resulting in lower premiums for target shareholders. An alternative hypothesis is that target managers use termination fees to encourage bidder participation by ensuring that the bidder is compensated for the revelation of valuable private information released during merger negotiations. My empirical evidence demonstrates that merger deals with target termination fees involve significantly higher premiums and success rates than deals without such clauses. Furthermore, only weak support is found for the contention that termination fees deter competing bids. Overall, the evidence suggests that termination fee use is at least not harmful, and is likely beneficial, to target shareholders. (C) 2003 Elsevier B.V. All rights reserved.