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Information Advantage in Takeover Auctions

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Takeover auctions

Takeover auctions differ from traditional auctions where potential buyers usually know the value of the company they are trying to acquire. In contrast, takeover auctions can be very unpredictable. Potential buyers can only estimate the value of the target firm. The precision of such estimates also depends on their relationship with the firm’s management team.

When the shares of the target firm are traded on the market, a potential buyer may decide to acquire some of the firm’s shares, also called a toehold, before making a bidding offer. Such a strategic move can influence the buyer to either acquire the company for a lower price or sell those shares at a competitive price.

What’s this research project about?

Professor KhoroshilovYuri Khoroshilov, Associate Professor at the University of Ottawa's Telfer School of Management, will examine how the potential buyer’s information advantage affects the outcome of takeover auctions that involve toeholds. His research is supported by a Social Sciences and Humanities Research Council (SSHRC) Insight grant.

Who will gain from this research?

By revealing the impact of the bidders’ information advantage on takeover actions, Professor Khoroshilov’s research will help researchers and professionals in finance better understand bidding behaviors in takeover auctions.

The Telfer School of Management is committed to developing cutting-edge research in a variety of topics in management. As our faculty continues fostering research excellence, the Telfer School community and partners also benefit from valuable insights with impact. Over the next weeks, we will give an overview of the five research projects that received the prestigious SSHRC Insight grant in 2019.

Learn more about the SSHRC Insight Program.