We analyze the sales method for a sample of 575 acquisitions announced between 1998 and 2012 and find that targets choose auctions to maximize the target takeover premium through greater competition and to relax their financial constraints. Auctions, compared to negotiated deals, are associated with significantly higher target announcement returns, especially for relatively small targets. Bidder returns are positively related to auctions for bidders acquiring relatively small targets, not for the full sample. Taking into account size differences, we find that auctions, decrease target gains and increase bidder gains expressed in dollars.

Acquisitions, Auctions, Negotiations, Sales method
dx.doi.org/10.1016/j.jbankfin.2015.06.017, hdl.handle.net/1765/91452
ERIM Top-Core Articles , ERIM Top-Core Articles
Journal of Banking & Finance
Rotterdam School of Management (RSM), Erasmus University

Schlingemann, F.P, & Wu, H. (2015). Determinants and shareholder wealth effects of the sales method in acquisitions. Journal of Banking & Finance, 59, 469–485. doi:10.1016/j.jbankfin.2015.06.017