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Efficient mechanisms for mergers and acquisitions

Publication ,  Journal Article
Brusco, S; Lopomo, G; Robinson, DT; Viswanathan, S
Published in: International Economic Review
August 1, 2007

We characterize incentive-efficient merger outcomes when payments can be made both in cash and stock. Each firm has private information about both its stand-alone value and a component of the (possibly negative) potential synergies. We study two cases: when transfers can, and cannot, be made contingent on the value of any new firm. When they can, we show that redistributing shares of any nonmerging firm generates information rents and provides necessary and sufficient conditions for the implementability of efficient merger rules. When they cannot, private information undermines efficiency more when it concerns stand-alone values than synergies. Here, acquisitions emerge as optimal mechanisms. © 2007 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Duke Scholars

Published In

International Economic Review

DOI

EISSN

1468-2354

ISSN

0020-6598

Publication Date

August 1, 2007

Volume

48

Issue

3

Start / End Page

995 / 1035

Related Subject Headings

  • Economics
  • 3803 Economic theory
  • 3802 Econometrics
  • 3801 Applied economics
  • 14 Economics
 

Citation

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Brusco, S., Lopomo, G., Robinson, D. T., & Viswanathan, S. (2007). Efficient mechanisms for mergers and acquisitions. International Economic Review, 48(3), 995–1035. https://doi.org/10.1111/j.1468-2354.2007.00452.x
Brusco, S., G. Lopomo, D. T. Robinson, and S. Viswanathan. “Efficient mechanisms for mergers and acquisitions.” International Economic Review 48, no. 3 (August 1, 2007): 995–1035. https://doi.org/10.1111/j.1468-2354.2007.00452.x.
Brusco S, Lopomo G, Robinson DT, Viswanathan S. Efficient mechanisms for mergers and acquisitions. International Economic Review. 2007 Aug 1;48(3):995–1035.
Brusco, S., et al. “Efficient mechanisms for mergers and acquisitions.” International Economic Review, vol. 48, no. 3, Aug. 2007, pp. 995–1035. Scopus, doi:10.1111/j.1468-2354.2007.00452.x.
Brusco S, Lopomo G, Robinson DT, Viswanathan S. Efficient mechanisms for mergers and acquisitions. International Economic Review. 2007 Aug 1;48(3):995–1035.
Journal cover image

Published In

International Economic Review

DOI

EISSN

1468-2354

ISSN

0020-6598

Publication Date

August 1, 2007

Volume

48

Issue

3

Start / End Page

995 / 1035

Related Subject Headings

  • Economics
  • 3803 Economic theory
  • 3802 Econometrics
  • 3801 Applied economics
  • 14 Economics