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Financial Management

Initial Offer Precision and M&A Outcomes

Journal Article
Hukkanen, Petri and Matti Keloharju (2019). “Initial Offer Precision and M&A Outcomes”. Financial Management 48(1), 291–310.

Petri Hukkanen, Matti Keloharju

Building on recent research in social psychology, this paper analyzes the link between the precision of initial cash offers and mergers and acquisition (M&A) outcomes. About one‐half of the offers are made at the precision of one or five dollars per share, while an additional one‐third are made at the precision of a half dollar or one quarter. The practice of making offers at round price‐per‐share levels is associated with a higher purchase price for target shares and a lower probability of deal completion.