Making a public offer to acquire shares of a target

Assignment Help Finance Basics

Reference no: EM131792823

Question: An acquirer considers making a public offer to acquire shares of a target. The target has N shares outstanding, where N is an even natural number. Conditional on observing the acquirer's offer, the target's shareholders decide whether to accept it or not. The value of the target is V(succes) if the acquirer obtains at least 50% of the shares and V(failure) < V(succes) if otherwise.

a. Suppose that the target's shareholders are nonpivotal, that is, each of them takes the aggregate decisions of all shareholders to accept or reject the acquirer's offer as given. Show that there is no Nash equilibrium in which the target acquires at least 50% of the shares for a per-share price of p < V(succes) / N.

b. For letter b) and c) below, assume that each of the target's shareholders holds one indivisible share.

On the acquirer's behalf, design an offer such that, under a Nash equilibrium, the acquirer obtains 50% of the synergies V(succes) - V(failure). (Hint: it could help to draw the two-shareholder normal form of the game)

c. On the acquirer's behalf design an offer such that, under a Nash equilibrium, the acquirer obtains 100% of the synergies V(succes) - V(failure). (Hint: it could help to condition the payoffs of the two-shareholder normal form of the game on the offer designed)

d. Given your answers in a), b), and c), what allows the acquirer to appropriate 100% of synergies in c) that is not in either a) or b)?

Reference no: EM131792823

Questions Cloud

What is the maximum weekly revenue : (a) After how many weeks will the weekly revenue be maximized? (b) What is the maximum weekly revenue?

How effective are teams at realizing of return : How effective are teams at realizing Return of Investments (ROI) from their social media platforms?

How will harris stock price change upon the announcement : Harris Corporation has $322 million in cash, and 119 million shares outstanding. Suppose the corporate tax rate is 25%, and investors pay no taxes on dividends.

Where on balance sheet account balance representing funds : Where on the balance sheet would the account balance representing funds received for games not yet played be classified

Making a public offer to acquire shares of a target : An acquirer considers making a public offer to acquire shares of a target. The target has N shares outstanding, where N is an even natural number.

Innovation measurement system in your organization : Identify the barriers that you might face in implementing an innovation measurement system in your organization. How are these barriers overcome?

Ongoing activities needed to sustain its viability : what is needed from executive management beyond being a role model to establish an ethics program and the ongoing activities needed to sustain its viability?

Find the number of days before the percent is maximized : News impact Suppose that the percent p (as a decimal) of people who could correctly identify two of eight defendants in a drug case t days.

Show relationships between the given entities : In a stockbrokerage firm, clients are served by brokers. Each client is assigned to a broker. A broker can handle up to 20 clients.

User Account

All Pages