Why Do Takeover Targets Protect Acquirers? Evidence from Force-the-Vote Provisions

Financial Management, Forthcoming

58 Pages Posted: 20 Mar 2018 Last revised: 6 Feb 2020

See all articles by Sridhar Gogineni

Sridhar Gogineni

The University of Tampa - John H. Sykes College of Business

John Puthenpurackal

University of Nevada, Las Vegas - Department of Finance

Date Written: February 5, 2020

Abstract

We examine force-the-vote (FTV) provisions in M&A transactions from 2003-2016 and test competing agency and efficient contracting explanations for their usage. Target FTV provisions are observed more frequently when bidding is costly, and are associated with higher target returns, lower likelihood of competing bids and higher likelihood of deal completion. By providing greater deal protection to acquirers, target FTV provisions appear to improve bidding incentives, resulting in higher target returns, consistent with efficient contracting. Our primary results appear robust and economically significant and complement prior literature that evaluates the effects of various M&A clauses and features on deal outcomes.

Keywords: Force-the-vote, M&A provisions, deal protection, initial offer premium, mergers, M&A

JEL Classification: G34

Suggested Citation

Gogineni, Sridhar and Puthenpurackal, John, Why Do Takeover Targets Protect Acquirers? Evidence from Force-the-Vote Provisions (February 5, 2020). Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3140721 or http://dx.doi.org/10.2139/ssrn.3140721

Sridhar Gogineni

The University of Tampa - John H. Sykes College of Business ( email )

401 W. Kennedy Blvd.
Tampa, FL 33606-1490
United States
8132533163 (Phone)

John Puthenpurackal (Contact Author)

University of Nevada, Las Vegas - Department of Finance ( email )

4505 S. Maryland Parkway
Box 456008
Las Vegas, NV 89154-6008
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
51
Abstract Views
533
rank
469,996
PlumX Metrics