عبور از حق بیمه های تصرف و آمیزه ای از پرداخت: آزمون تجربی از تنظیم قرارداد در معاملات M & A

The analyses of the tender offer premiums and of the means of payment should not be performed separately. In the empirical literature, these two variables are often considered independently, although they may have an endogenous relationship in a contractual setting. Using a sample of European M&As over the 2000–2010 decade, we show that these two variables are jointly set in a contractual empirical approach. The relationship between the percentage of cash and the offer premium is positive: higher premiums yield payments with more cash. We highlight that the payment choice is not a continuum between full cash and full share payments. Two different regimes of payment in M&A transactions are empirically characterized. We analyze the major determinants of M&A terms when the offer premium and the means of payment are jointly set. The underlying rationale of an asymmetry of information and a risk-sharing calculus is found to be significant in the setting of the agreement.

The empirical literature of mergers and acquisitions (M&A) transactions largely examines the acquirer’s point of view: Why decide to bid for a target? How to set the offered price? How to determine the means of payment? However the target shareholders may not agree the proposal and it may fails. Even through a public takeover bid, the investors, the board or the managers of the target may influence the bidder to review the terms of his offer. Finally, in most cases the deal will be successful but its terms may have changed since the inception of the process. The targets may influence the final terms of an M&A deal (Faccio and Masulis, 2005). Successful takeovers are contractual agreements in which both parties find enough interest to agree on an offer. The two key variables defining this contract are the takeover premium and the offered means of payment. The basis of a contractual approach is that these key variables are jointly determined and agreed on as a package. We need to examine the way these terms will interfere. This paper will question how far that global contractual setting introduces a balance between the takeover offer premium and the means of payment. Acquisition premium is a well-known measure, but the choice between means of payment is manifold: cash payment and share payment can be combined and an important number of European transactions are paid using hybrid cash-share schemes. The determinants of the means of payment are known; contextual pressure or challenge for control may, for instance, explain the use of cash payment. Empirical regularities have also been identified for international cross border acquisitions, which are frequently paid in cash. The European context is an interesting empiric field to analyze M&A transactions. The scope of share ownership is extensive, from dispersed ownership to controlled and family firms (Faccio and Lang, 2002). Using a sample of European firms, Faccio and Masulis (2005) focus on the univariate determinants of the means of payment. Martynova and Renneboog (2009) analyze the financing decision and thus showed that the latter does not follow the same rationale as the payment decision. However the European context has not been used as an empirical field to complete these findings by testing the interdependency between the means of payment choice with the acquisition premium explicitly. We focus on European deals because very different schemes of payment are effectively used. However transactions develop in a homogenous regulatory context in the European Union countries; consequently the external and institutional determinants weigh less. The intrinsic characteristics of a deal will explain better the balance between the acquisition premium and the choice of means of payment specific to each transaction. From an analytical point of view, a merger or acquisition is an economic project that generally poses some economic risks for the shareholders whether targets or acquirers. Both face an asymmetry of information which leads to the “double lemon” problem identified by Hansen (1987). This risk can be dealt with when setting the contract and using an appropriate choice of means of payment. Cash payment is a way for the seller to avoid risks by receiving liquidity, while shares payment is a way to make the seller bear some of the risks introduced by the project. The means of payment decision is a part of the contract, which is as important as the price itself because it is a way of sharing the expected risk (and profit) from the transaction. This should be particularly true in mixed payment schemes where the relative percentage between shares and cash payment is a parameter to set. In these contexts, the package of a mixed payment percentage and a takeover premium will define the contract, and both depend on the asymmetry of information. The endogenous nature of the link between the takeover offer premium and the means of payment has not been extensively analyzed in empirical literature. Empirical studies often analyze either the takeover premiums or the means of payment, but rarely both (Eckbo, 2009). It has an important methodological consequence as a one-dimensional analysis of the premium or the means of payment is incomplete and so ignores their joint dependency. We will not pursue numerous empirical studies that look individually at premiums or means of payment because such approaches are incomplete and their results can be misleading. We need to use a methodology explaining jointly the setting of both the means of payment and the premium. An empirical analysis is developed with regard to a sample of 528 European Union (EU) deals. Our contribution is to show a positive relationship between the percentage of cash and the offer premium: higher premiums yield payments with more cash. From a methodological point of view, we show that systems of simultaneous equations are better suited to the problem as they give different and better results compared to univariate analyses of either the premiums or the means of payment. Our findings support the view of M&A deals as global and complex contractual equilibriums. We outline that the means of payment is not a continuous variable but refers to two different regimes of payment in M&A transactions in which full cash or full share payments are “corner solutions.” We find that the major determinants of M&A terms when the premium and means of payment are jointly set include information asymmetry, the risk-sharing calculus between parties and the specific characteristics of the deal, such as cross border acquisitions, competition and same-sector transactions. This paper is organized into three parts. Section 1 presents a review of the literature, and Section 2 presents the sample and variables. The empirical results are analyzed in Section 3. A conclusion follows

The analysis of the offer premiums and of the means of payment should not consider one variable as exogenous and explicative of the other. We show that these two variables are jointly set up in a contractual approach. More precisely, the relationship between the choice of cash payment and the offer premium is positive: higher premiums will go along with mixed payment with more cash, or full payment in cash. A trade-off equilibrium develops: when the seller wants a better price, he/she should accept to be paid less in potential future returns (i.e., in new equity shares). The risk sharing nature of an M&A agreement is confirmed and influences the means of payment. The double risk situation relies on a double asymmetry of information between the buyer and the seller, as identified by Hansen (1987). The choice of means of payment is a complex decision that can be done in alternate terms of full cash or full share payments. Hybrid payments follow a different rationale. The fine tuning of the percentage paid in cash is also an important term in a successful transaction and helps in delivering information. Considering a sample of European M&As over the 2000–2010 decade, the determinants of the means of payment choice are known and confirmed. Firms with a high growth potential and a high stock value are not particularly prone to finance an acquisition with equity. The growth opportunities of the target will enhance the paid premiums. In line with the results of Martynova and Renneboog (2009), the financing decision at the acquirer’s level does not seem significant: the acquirer’s leverage ratio does not explain the mix of payment. However, the cash availability hypothesis is supported by our data. It explains the use of full cash consideration, or more cash in mixed cash-share payments. This opportunistic financing decision embedded in the transaction will not modify the subsequent leverage ratio. Another alternate explanation, for instance when there is no cash flow availability, is that the payment decision by cash may subsequently influence the financing decision by issuing more debt or by selling new shares. A dynamic model of acquisition financing may be explored in case of cash payment with a focus not on prior financing conditions but on posterior leverage. As a result, we show that an empirical analysis should not be performed on a global sample mixing any regime of payment. Full cash and full share payments are corner solutions that will yield different levels of equilibrium between parties. The determinants of the transaction terms are not the same, and we identified two regimes of payment. Blending all the deals in one sample will assume that a continuum exists from full cash to all-shares payments. Running regressions even through a simultaneous setting on a global sample can be misleading. This will ignore the difference of regimes of payments and the results may be spurious. The existence of regimes of payment in M&A transactions is the a conclusion of the paper. It also identifies the different sets of determinants of M&A terms in a contractual approach in which the offer premium and the means of payment are set jointly. The underlying rationale of asymmetry of information and risk sharing calculus characterizes the contractual approach of M&As. It combines well with known factors, such as cross border acquisitions, competitive transactions or the absolute size of the target, all of which favor cash payment. However, the limited number of hybrid deals in our sample would justify further development.