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Optimal Acquisition Strategies in Unknown Territories

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  • Koska, Onur A.
  • Staehler, Frank

Abstract

This paper investigates the optimal acquisition strategy of a foreign investor, who wants to acquire one out of two local firms, under incomplete information. The response to acquisition offers is also a signal on firm productivity, affecting future competition. We identify a competition effect (firms compete for acquisition) and a revelation effect (firms reveal their productivities). These effects reduce the rejection profits and increase the acceptance probability. If the investor makes simultaneous offers, the revelation effect is a potential threat because a firm may signal low productivity, but may not be acquired. If, however, the investor makes offers sequentially, this threat does not exist, making sequential offers the optimal acquisition strategy.

Suggested Citation

  • Koska, Onur A. & Staehler, Frank, 2014. "Optimal Acquisition Strategies in Unknown Territories," MPRA Paper 68196, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68196
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    References listed on IDEAS

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    Cited by:

    1. Onur A. Koska, 2016. "A Consumer-Surplus Standard in Merger Approvals, Foreign Direct Investment, and Welfare," ERC Working Papers 1612, ERC - Economic Research Center, Middle East Technical University, revised Oct 2016.
    2. Onur A. Koska & Ilke Onur & Frank Stähler, 2018. "The scope of auctions in the presence of downstream interactions and information externalities," Journal of Economics, Springer, vol. 125(2), pages 107-136, October.
    3. Onur A. Koska, 2019. "A consumer-surplus standard in foreign acquisitions, foreign direct investment, and welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(1), pages 149-179, February.

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    More about this item

    Keywords

    Multinational Firms; Acquisition; Incomplete Information;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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