Corporate acquisistion process: is there an optimal cash-equity payment mix?

Hubert de La Bruslerie (1)

1 DRM - Dauphine Recherches en Management

This paper examines the combination of cash and share payments proposed in the corporate acquisition process. Particularly, it analyzes the conditions of an optimal mixed payment in the context of an asymmetry of information. Using a model, we highlight that setting the conditions of payment is an endogenous part of a takeover agreement between the acquirer and the target. Our contribution is to show how, in the acquisition process, the setting of the cash percentage is a key element for conveying private information on the gains of synergy and the gains that result from the transaction. In our model, we internalize asymmetries of information and possible exaggeration biases. Both will influence the joint setting of a mixed payment scheme.

Mots clés: mergers and acquisitions; information asymmetry; means of payment; contractual approach; synergy gains

Domaines: Gestion et management

Hubert de La Bruslerie. Corporate acquisistion process: is there an optimal cash-equity payment mix?. International Review of Law and Economics, 2012, 32, pp.83-94. ⟨10.1016/j.irle.2011.07.003⟩. ⟨halshs-00636349⟩