Toeholds and Takeovers Jeremy Bulow

  title={Toeholds and Takeovers Jeremy Bulow},
  author={Ming Huang and Paul Klemperer},
Part ownership of a takeover target can help a bidder win a takeover auction, often at a low price. A bidder with a “toehold” bids aggressively in a standard ascending auction because its offers are both bids for the remaining shares and asks for its own holdings. While the direct effect of a toehold on a bidder’s strategy may be small, the indirect effect is large in a common value auction. When a firm bids more aggressively, its competitors face an increased winner’s curse and must bid more… CONTINUE READING
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