Bidder contests in international mergers and acquisitions: The impact of toeholds, preemptive bidding, and termination fees

For international mergers and acquisitions we analyze the effectiveness of different bidder strategies, first in preventing bidder competition, and second in increasing the likelihood of success. We provide robust empirical evidence of the effectiveness of toeholds and termination fees in reducing the likelihood of competition and, if a contest occurs, increasing the probability of success, especially after controlling for bidder asymmetries. The effects of termination fees vary over time and legal origin. Overall, there is hardly any evidence that high initial offers can prevent contests. However, competition is preempted in civil law countries with a high initial premium. A higher percentage of cash payment also increases the probability of success in bidder contest. Moreover, latent competition is generally not sufficient to curb the influence of observable bidder competition on target and bidder wealth. Finally, serial acquirers are more likely to prevent bidder contests and experienced and reputably advised bidders are more successful in deal completion. Overall, we offer novel evidence for the success of different bidding strategies in international mergers and acquisitions.