Initial Offer Precision and M&A Outcomes

Reprint No. 2019:64

Author(s): Petri Hukkanen and Matti KeloharjuYear: 2019 Title: Financial Management Volume (No.): 48 (1) Pages: 291–310
Online article (restrictions may apply)

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.

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

Matti Keloharju


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