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Holistic bidding strategies: Addressing target shareholders’ behavioral resistance in M&As

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  • Lauterbach, Beni
  • Loriot, Blake
  • Mugerman, Yevgeny
  • Shemesh, Joshua

Abstract

The study examines how behavioral considerations of target shareholders affect deal completion likelihood. Lauterbach, Mugerman and Shemesh (2024) show that bidders adjust their offer prices to accommodate target shareholders’ loss aversion, and we find that these premium adjustments appear to mitigate potential bid resistance. Our tests, conducted in an extensive sample of all U.S. public firm merger offers in 1990–2019, suggest a holistic pricing strategy among bidders: the offer price is based not only on intrinsic values and financial analysis; it also usually incorporates the price adjustment necessary to neutralize target shareholders’ behavioral resistance, thereby facilitating deal acceptance.

Suggested Citation

  • Lauterbach, Beni & Loriot, Blake & Mugerman, Yevgeny & Shemesh, Joshua, 2025. "Holistic bidding strategies: Addressing target shareholders’ behavioral resistance in M&As," Finance Research Letters, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:finlet:v:74:y:2025:i:c:s154461232500087x
    DOI: 10.1016/j.frl.2025.106822
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    More about this item

    Keywords

    Mergers and acquisitions; Deal completion; Reference prices; Prospect theory;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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