Initiating contact in merger negotiations: Who leads and who follows?

• Published in: Journal of economics and business 2022-03, Vol.119, p.106044, Article 106044
• Main Authors: Jurich, Stephen N., Walker, M. Mark
• Format: Article
• Language: English
• Subjects: Auction; Controlled-sale; Deal motivations; Negotiating procedure
• ISSN: 0148-6195; 1879-1735
• DOI: 10.1016/j.jeconbus.2021.106044

•Classification of negotiating procedures into five mutually exclusive categories using SEC filings.•Deal motivations are indicators of negotiating procedure.•Targets that merge for technological expansion are more likely to use a controlled sale.•Targets that cite access to capital are more likely to use a controlled sale.•Acquirers are less likely to initiate contact when technology is involved. We examine the determinants of the managers’ choice of negotiating procedure when firms merge. We use company filings with the Securities and Exchange Commission (SEC) to identify the merging firms’ negotiating procedure and their underlying operating, marketing, and financial motivations for pursing the deal. When target-firm managers cite technological expertise and access to capital as reasons for the merger, we find that they are less likely to use an auction as the sales procedure. Acquiring-firm managers are less likely to initiate the process when they cite technological expertise as a reason for the merger.