Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2008-12-15
Number: 08-118/2
Author-Name: Riccardo Calcagno
Author-Email: rcalcagno@feweb.vu.nl
Author-Workplace-Name: VU University Amsterdam
Author-Name: Sonia Falconieri
Author-Email: s.falconieri@brunel.ac.uk
Author-Workplace-Name: Brunel University
Title: White Knights and the Corporate Governance of Hostile Takeovers
Abstract: We analyze the dynamics of takeover contests where hostile raiders compete against white knights involved by a lead blockholder of the target firm (the incumbent). We assume that the incumbent has the power to bargain with the potential bidders to set a minimum takeover price. We characterize the conditions under which a white knight wins the takeover contest despite the smaller value of its synergies as compared to those of the hostile bidder. The paper provides a new explanation for the reason why we observe so few hostile takeovers in reality; moreover, it sheds some light on the effectiveness of white knights as an anti-takeover device and the role played by leading minority blockholders in the market for corporate control.
Classification-JEL: D44, G34
Keywords: Hostile takeovers, white knights, Nash bargaining
File-Url: https://papers.tinbergen.nl/08118.pdf
File-Format: application/pdf
File-Size: 300181 bytes
Handle: RePEc:tin:wpaper:20080118