This paper focuses on certain mechanisms that govern the sale of corporate assets. Under Delaware law, when a potential acquirer makes a serious bid for a target, the target's Board of Directors is required to act as would "auctioneers charged with getting the best price for the stock- holders...

We compare the two most common bidding processes for selling a company or other asset when participation is costly to buyers. In an auction all entry decisions are made prior to any bidding. In a sequential bidding process earlier entrants can make bids before later entrants choose whether to...

We analyze how a takeover contest should optimally be designed. Our key assumption is that not all bidders are equally well informed about a target's value. We present a three-stage sequential procedure which is optimal in such a setting. In this procedure, the target first offers an exclusive...

Part ownership of a takeover target can help a bidder win a takeover auction, often at a low price. A bidder with a ‘toehold’ bids aggressively in a standard ascending auction because its offers are both bids for the remaining shares and asks for its own holdings. While the direct effect of...

We analyze the dynamics of takeover contests where hostile raiders compete against white knights involved by a lead blockholder of the target firm (the incumbent). We assume that the incumbent has the power to bargain with the potential bidders to set a minimum takeover price. We characterize...

the authors develop a two-sided asymmetric information model of asset sales that incorporates the key differences from mergers and allows the information held by each party to be impounded in the transaction. Buyer information is conveyed through a first-stage competitive auction. A seller with...

This paper characterizes how a target firm should be sold when the possible buyers (bidders) have prior stakes in its ownership (toeholds). We find that the optimal mechanism needs to be implemented by a non-standard auction which imposes a bias against bidders with high toeholds. This...

This paper proposes and tests an explanation as to why rational managers seeking to maximize shareholder value can pursue value-decreasing mergers. It can be optimal to overpay for a target firm and decrease shareholder value if the loss is less than in an alternative where the merger is...

We use a classroom game, the "wallet Game", to show that in standard ascending, i.e. English, auctions of close-to-common-values objects, even slight asymmetries between bidders can have very large effects on prices. Examples of small asymmetries are a small value advantage for one bidder or a...