How Are Firms Sold?




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    • Boone is from the University of Kansas School of Business Administration and Mulherin is from the University of Georgia Terry College of Business. For comments on prior drafts, we thank Bob Hansen, David Harrington, Zhikun Li, Michelle Lowry, Jon Macey, Mike Maloney, Mark Mitchell, David Robinson, Chip Ryan, Janet Smith, Mike Stegemoller, Fred Weston; session participants at the Duke/UNC Corporate Finance Conference, the meeting of the Financial Management Association, and the meeting of the American Finance Association; seminar participants at Babson College, the College of William and Mary, the University of Bolzano/Bozen, the University of Georgia, the University of Kansas, the University of Nevada Las Vegas, the University of Perugia, the University of Pittsburgh, the University of Siena, and the University of Tuscia; as well as an anonymous referee and the Editor, Rob Stambaugh.


As measured by the number of bidders that publicly attempt to acquire a target, the takeover arena in the 1990s appears noncompetitive. However, we provide novel data on the pre-public, private takeover process that indicates that public takeover activity is only the tip of the iceberg of actual takeover competition during the 1990s. We show a highly competitive market where half of the targets are auctioned among multiple bidders, while the remainder negotiate with a single bidder. In event study analysis, we find that the wealth effects for target shareholders are comparable in auctions and negotiations.