Financial versus strategic buyer interest: initiation, competition and persistence during the private bidding process
De Maeseneire, Wouter Dereeper, Sébastien Luypaert, Mathieu Thuy, Mai Nguyen
De Maeseneire, Wouter
Dereeper, Sébastien
Luypaert, Mathieu
Thuy, Mai Nguyen
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Journal article with impact factor
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Supervisor
Publication Year
2025-11-13
Journal
Managerial Finance
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Publication Volume
51
Publication Issue
10
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Abstract
Purpose This paper aims to explore how target firm attributes affect the interest and persistence of financial versus strategic bidders in the private stages of a corporate takeover process. We study strategic and financial bidder attraction from deal initiation onwards, as such it is unaffected by deal process characteristics or pricing strategies. Design/methodology/approach Relying on the Edgar filings published by the U.S. Securities and Exchange Commission (SEC), we hand-collected the number of strategic and financial bidders in each stage of the private bidding process for a sample of 606 takeovers announced between 2005 and 2016. To assess bidder interest, we use three proxies: bidder initiation, bidder competition in the private bidding process, and bidder persistence throughout the entire bidding process. In addition, we compare acquired targets to a matched control group of non-targets. Findings Our results indicate that financial bidders, compared to strategic bidders, are more likely to display interest across the various private deal stages in targets with low market-to-book ratios, high cash flow generation and low R&D expenses. Financial buyers, hence, are particularly attracted when targets offer stand-alone value improvement potential or are undervalued, when cash flow generation allows for exploiting the benefits of debt financing and when technological innovation is low. Originality/value This paper is the first to investigate strategic versus financial bidder interest in the private phases of the M&A process, allowing us to explore true interest in specific targets rather than the outcome of a competitive deal process. Our results provide valuable insights into how targets’ antecedents attract both types of bidders.
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Keywords
3501 Accounting, Auditing and Accountability, 3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 3507 Strategy, Management and Organisational Behaviour