Why include a freeze-out provision in takeover contracts? Because if not, investors would not tender shares. How is that? Consider the Grossman-Hart (1980) view that if the takeover is in fact value maximizing, then shareholders would have an incentive to not tender their shares but to wait for the stock price to increase. Of course if shareholders knew this, then they would all wait and the deal would not get done. Freeze-outs force shareholders’ hands and thereby eliminate the problem of non-tendering shareholders, thus enabling takeovers to occur. In an soon to be published JF article, Amihud, Kahan, and Sundaram look at the economic desirability of such freeze-outs. [FinanceProfessor.com Annotation]
Content: Article
Authors: Marcel Kahan, Rangarajan K. Sundaram, Yakov Amihud
Subject: Finance
Industry: Investment Banking
Authors: Marcel Kahan, Rangarajan K. Sundaram, Yakov Amihud
Subject: Finance
Industry: Investment Banking
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