Template-Type: ReDIF-Paper 1.0
Title: Hostile Versus Friendly Takeovers
Author-Name: Monika Schnitzer
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Abstract: The paper analyzes the optimal decision of a raider who can choose
 between a hostile and a friendly takeover. Empirical evidence shows 
 that the transaction costs of a hostile takeover are much higher than
 those of a friendly one. The question therefore arises why a raider 
 should ever wish to engage in a hostile takeover. The central argument
 of the paper rests on the assumption that shareholders have less
 information about the true value of their firm than the incumbent
 management. A raider might prefer to make a hostile tender offer
 directly to the uninformed shareholders rather than negotiating with 
 the informed management even if the transaction costs are higher. The
 analysis shows furthermore how shareholders can use golden parachutes
 and poison pills to improve their expected payoffs in a case of 
 takeover.
Series: Sonderforschungsbereich 303, University of Bonn, Germany
 Creation-Date: 1990-05
Revision-Date: 
Handle: RePEc:bon:bonsfa:297