M&A with an entrenched Board: a global games analysis

OMI Seminar Series

We use global games to study sophisticated shareholders' buy-or-hold decision during a takeover process. Boards are entrenched, but their ability to reject a profitable takeover bid is reduced the greater the proportion of shareholders who sell-out early. Shareholders face a problem of strategic substitutes. Our model delivers a unique threshold-equilibrium which allows us to study the probability of deal success and the interim share price. We show rules aimed at strengthening long-term ownership actually encourage such shareholders to sell early; and that incentives to politically pressure Boards are greatest in jurisdictions with the greatest respect for shareholder rights.



John Thanassoulis, Professor of Financial Economics, Warwick

Tuesday, May 3, 2016 - 12:30
to 13:30