Takeover Bid Rules and M&A Premiums: Who Pays the Price for Investor Protection?
Takeover Bid Rules and M&A Premiums: Who Pays the Price for Investor Protection?

Summary/Abstract: The mandatory bid rule (MBR) requires an acquirer in an M&A transaction to make a fair offer to the remaining shareholders when exceeding specific thresholds. This severe encroachment on contractual freedom, which is supposed to protect minority shareholders, should show an impact on the takeover premium. We analyze the influence of national MBR thresholds of 49 countries, including all OECD, G20, and Financial Stability Board members. We can show that exceeding specific MBR thresholds significantly negatively impacts the takeover premium. The results show that an MBR as investor protection is not associated with a price premium but with a discount at the expense of the remaining shareholders. We control for the influence of the acquirer's successive share acquisition and deal-, target- and acquirer-specific variables. We contribute evidence from a large-scale multinational empirical study on the impact of MBR on the takeover premium paid and its consequences for the remaining shareholders.

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