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原文：
The choice of payment method in European M & A Global M&A activity has grown dramatically over the last ten years, bringing with it major changes in the organization and control of economic activity around the world. Yet, there is much about the M&A process that we do not fully understand, including the choice of payment method. Given the large size of many M&A transactions, the financing decision can have a significant impact on an acquirer’s ownership structure, financial leverage, and subquent financing decisions. The financing decision can also have rious corporate control, risk bearing, tax and cash flow implications for the buying and lling firms and shareholders.
In making an M&A currency decision, a bidder is faced with a choice between using cash and stock as deal consideration. Given that most bidders have limited cash
and liquid asts, cash offers generally require debt financing. As a conquence, a bidder implicitly faces the choice of debt or equity financing, which can involve a tradeoff between corporate control con
cerns of issuing equity and rising financial distress costs of issuing debt. Thus, a bidder’s M&A currency decision can be strongly influenced by its debt capacity and existing leverage. It can also be strongly influenced by management’s desire to maintain the existing corporate governance structure. In contrast, a ller can be faced with a tradeoff between the tax benefits of stock and the liquidity and risk minimizing benefits of cash consideration. For example, llers may be willing to accept stock if they have a low tax basis in the target stock and can defer their tax liabilities by accepting bidder stock as payment. On the other hand, llers can prefer cash consideration to side step the risk of becoming a minority shareholder in a bidder with concentrated ownership, thereby avoiding the associated moral hazard problems. Unfortunately, due to data limitations, this ller trade off can not be easily measured.
网站紧急升级Under existing theories of capital structure, debt capacity is a positive function of tangible asts, earnings growth and ast diversification and a negative function of ast volatility. Firms with greater tangible asts can borrow more privately from banks and publicly in the bond market. Since larger firms are generally more diversified, we expect them to have a lower probability of bankruptcy at a given leverage ratio and thus, greater debt capacity. The financing constraint and bankruptcy risk considerations can also reduce a lenders willingness to finance a bidder’s cash bid, especially in relatively large deals.
In asssing potential determinants of an M&A payment method, our focus is on a bidder’s M&A financing choices, recognizing that targets can also influence the final terms of an M&A deal. However,if a target’s financing choice is unacceptable to the bidder, then the propod M&A transaction is likely to be aborted or el the bidder can make a hostile offer on its own terms. For a deal to succeed, the bidder must be satisfied with the financial structure of the deal.多久能测出怀孕
Bidder and target considerations:
* Corporate Control
Bidders controlled by a major shareholder should be reluctant to u stock financing when this caus the controlling shareholder to risk losing control. Assuming control is valuable, the prence of dominant shareholder positions should be associated with more frequent u of cash, especially when the controlling shareholder’s position is threatened. To capture this effect, we u the ultimate vo ting stake held by the largest controlling shareholder.
花生汤圆A bidder with diffu or highly concentrated ownership is less likely to be concerned with corporate control issues. In line with this argument, Martin (1996) documents a significantly negative relationship between the likelihood of stock financing and managerial ownership only over the interm
ediate ownership range. Therefore, we incorporate the possibility of a non-linear relationship between the method of payment and the voting rights of a bidder’s controlling shareholder by estimating both a linear and cubic specification for the ultimate voting control percentage of the bidder’s largest shareholder. In our robustness analysis, we also estimate a spline function for this variable.中学时代吉他谱
Corporate control concerns in M&A activity can manifest themlves in more subtle ways. Concentrated ownership of a target means that a stock financed acquisition can create a large blockholder, threatening the corporate governance of the acquirer. If the ller is cloly held or is a corporation disposing of a division, then ownership concentration tends to be very concentrated. This implies that financing the M&A deal with stock can create a new blockholder in the bidder. While the risk of creating a new bidder blockholder with stock financing is higher when a target has a concentrated ownership structure, this is especially ture when relative size of the deal is large. To capture the risk of creating a large blockholder when buying a target with stock financing, we employ CONTROL LOSS, the product between the target’s contr ol block and the deal’s ralative size. The relative deal size is computed as the ratio of offer size (excluding assumed liabilities) to the sum of a bidder’s equity pre-offer capitalization plus the offe r size. The target’s controlling blockholder is assumed to have 100 % ownership for unlisted targets and subsidiary targets.
* Collateral, Financial Leverage and Debt Capacity
We u the fraction of tangible asts as our primary measure of a bidder’s ability to pay cash, financed from additional borrowing. COLLATERAL is measured by the ratio of property, plant and equipment to book value of total asts. Myers (1977) argues that debtholders in firms with fewer tangible asts and more growth opportunities are subject to greater moral hazard risk, which increas the cost of debt, often making stock more attractive. Hovakimian, Opler and Titman(2001) find that a firm’s percentage of tangible asts has a strong positive influence on its debt level.化学基础知识入门
We also control for a bidder’s financial condition with its leverage ratio, FIN’L LEVERAGE. Since cash is primarily obtained by issuing new debt, highly levered bidders are constrained in their ability to issue debt and as a conquence u stock financing more fr equently. A bidder’s financial leverage is measured by the sum of the bidder’s face value of debt prior to the M&A announcement plus the deal value (including assumed liabilities)divided by the sum of the book valve of total asts prior to the announcement plus the deal value (including assumed liabilities). This captures the bidder’s post-deal leverage if the transaction is debt financed. This measure differs from Martin(1996) who us a pre-deal bidder leverage measure adjusted for industry mean and reports an insignificant effect.
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Bidder size is likely to influence its financing choices. Larger firms are more diversified and thus, have proportionally lower expected bankruptcy costs. They also have lower flotation costs and are likely to have better access to debt markets, making debt financing more readily available. Thus, cash financing should be more feasible in the ca of larger firms. Larger firms are also more apt to choo cash financing in smaller deals due to its ea of u, provided they have sufficient unud debt capacity or liquid asts. Further, the u of cash allows the bidder to avoid the significant costs of obtaining shareholder approval of pre-emptive rights exemptions and authorizations and the higher regulatory costs of stock offers. We measure bidder asts size by the log of pre-merger book value of asts in dollars(total asts). In addition to bidder control and financing considerations, we need to take into account veral other bidder characteristics.
党员证明* Relative Deal Size, Bidder Stock Price Runup and Asymmetric Information
Hann (1987) predicts that bidders have greater incentives to finance with stock when the asymmetric information about target asts is high. This information asymmetry is likely to ri as target asts ri in value relative to tho of a bidder. Yet, stock is ud in relatively larger deals, it produces more rious dilution of a dominant shareholder’s control position. Finally, as bidder equity capitalization ris, concern about its financing constraint falls, since there is a relatively smaller imp
act on its overall financial conditon. We proxy for the effects with REL SIZE, which is computed as the ratio of deal offer size (excluding assumed liabilities)divided by the sum of the deal’s offer size plus the bidder’s pre-offer market capitalization at the year-end prior to the bid.
Both Myers and Majluf (1984) and Hann (1987) predict that bidders will prefer to finance with stock when they consider their stock overvalued by the market and prefer to finance with cash when they consider their stock undervalued. As uncertainty about bidder ast value ris, this adver lection effect is exacerbated. Martin (1996) finds evidence consistent with this adver lection prediction. For a sample of publicly traded targets, Travlos (1987) finds that stock financed M&A deals exhibit much larger negative announcement effects than cash financed deals. He concludes this is consistent with the empirical validity of an adver lection effect. We u as a proxy for bidder overvaluation (or undervaluation), calculated from a bidder’s buy and hold cumulative stock return over the year preceding the M&A announcement month.
In addition to bidder considerations, we need to take into account typical target considerations. The preferences are related to risk, liquidity, asymmetric information and home bias.
人心复杂T1. Unlisted Targets and Subsidiary Targets
We u an indicator variable, UNLISTED TARGET, to control for listing status where the variable takes a value of one if the target is a stand-alone company, not listed on any stock exchange and is zero for listed targets and unlisted subsidiaries. When an M&A deal involves an unlisted target, a ller’s consumption/liquidity needs are also likely to be important considerations. The llers are likely to prefer cash
