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We explore a novel mechanism of network change that occurs when a Arm acquires another one and inherits its network ties. Such 'node collapse' can radically restructure the network in one transaction, constituting a revolutionary change compared with the incremental effect of tie additions and deletions, which have been the focus of prior research. We explore several properties of node collapses: their efficacy in helping firms achieve superior network positions, the externalities they impose on other network actors, and how they provide exclusive control over both internal and network resources. Using a simulation in which actors compete to acquire one another, we model network dynamics driven by node collapses. We find that node collapses directly affect the performance of the acquirer and indirectly that of other actors, and that the direction of network evolution hinges on the degree to which firms pursue internal versus network synergies through node collapses. History: Accepted by Olav Sorenson, organizations. Funding: The authors are thankful to the Wharton Dean's Research Fund for covering the cost of this project. Keywords: networks * node collapse * mergers and acquisitions * competitive dynamics * simulations and agent-based modeling, Introduction Interorganizational networks function as 'pipes' through which firms obtain valuable resources (Gulati 1999, Podolny 2001, Zaheer and Bell 2005). The position a firm occupies in a network can be [...]

A model that proposes a negative relation between cultural distance and international acquisition because it taxes integration capabilities during international acquisitions. It is found that cultural distance impedes understandability of key capabilities that need to be transferred. On the positive side, cultural distance enhances communication on acquisition performance.

I propose a model of mergers in which synergies and CEO power play a crucial role. A merger is modeled as a bargaining game between the acquiring and the target board of directors, with the gains from a merger divided according to the generalized Nash bargaining solution. The model's implications are consistent with the available empirical evidence on stock returns, and yield some new untested implications that are mainly related to the relationship between CEO power, corporate governance, and mergers. Finally, the model sheds light on the relationship between aggregate merger activity, synergies, and CEO power. (JEL: G 34, D 86, L 21, D 21)

To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1468-5957.2007.02049.x Byline: Stewart Jones (1), David A. Hensher (1) Keywords: prediction; nested logit; mixed logit; latent class models; corporate takeovers Abstract: Abstract: Econometric models involving a discrete outcome dependent variable abound in the finance and accounting literatures. However, much of the literature to date utilises a basic or standard logit model. Capitalising on recent developments in the discrete choice literature, we examine three advanced (or non-IID) logit models, namely: nested logit, mixed logit and latent class MNL. Using an illustration from corporate takeovers research, we compare the explanatory and predictive performance of each class of advanced model relative to the standard model. We find that in all cases the more advanced logit model structures, which correct for the highly restrictive IID and IIA conditions, provide significantly greater explanatory power than standard logit. Mixed logit and latent class MNL models exhibited the highest overall predictive accuracy on a holdout sample, while the standard logit model performed the worst. Moreover, the analysis of marginal effects of all models indicates that use of advanced models can lead to more insightful and behaviourally meaningful interpretations of the role and influence of explanatory variables and parameter estimates in model estimation. The results of this paper have implications for the use of more optimal logit structures in future research and practice. Author Affiliation: (1)The authors are respectively, Professor of Accounting, Faculty of Economics and Business and Professor of Management, Institute of Transport and Logistics Studies, Faculty of Economics and Business at the University of Sydeny. Article History: (Paper received March 2006, revised version accepted March 2007. Online publication August 2007) Article note: (*) Address for correspondence: Stewart Jones, Professor of Accounting, Discipline of Accounting, Faculty of Economics and Business, University of Sydney, Sydney, New South Wales, Australia., e-mail: s.jones@econ.usyd.edu.au

A model of mergers and acquisitions based on stock market misvaluations of the combining firms is presented. The model discusses the mode of payment, the valuation effects of mergers, merger waves and who acquires.

A methodology is developed for testing four hypotheses about the causes of takeovers. The tests link each hypothesis to predictions about the relationship between the dollar gains to the bidders shareholders. The hypotheses are tested with data for 168 mergers between large companies.

Traditionally, the merger literature has examined mergers and acquisitions from a strategic or financial perspective, largely overlooking important behavioral issues. In this paper, we present a comprehensive behavior-based framework of merger processes and outcomes designed to provide more academic rigor to the study of the behavioral aspects of the merger process. The proposed framework combines and synthesizes established merger-related behavioral concepts and relationships with new ones that are not encompassed within the current literature.

We derive a simple theoretical framework in which acquisitions are treated as an alternative way of obtaining capital goods. Our framework predicts that both investment and acquisitions are positively related to a firm's shadow value of capital. We transform our theoretical specification into an econometric model, which we then estimate using a long panel data-set spanning 503 US firms over 15 consecutive years. Our results indicate that an increase in the shadow value of capital has approximately the same proportionate effect on the level of acquisitions as it does on investment. This result proves to be robust to a variety of alternative specifications.

The model studies the interaction of time-to-build and demand uncertainty for irreversible investments such as new facilities. It finds that a sufficient amount of uncertainty can reduce investment size and speeds up investment decisions.

This article examines industrial organization and strategic management theory from an ecological perspective to study how horizontal mergers impact company performance. The relationship between competition, resources, market forces, and product management is addressed.

Byline: Helen M. Bowers (1), Norman H. Moore (2), K.S. Maurice Tse (3) Keywords: acquisitions; financial slack; asymmetric information; signaling and net pension assets Abstract: This paper shows that under certain conditions a firm's decision concerning the optimal medium of exchange to use in acquiring another firm is related to the decision of which source of capital should be used to finance long-term projects. An example of this type of interaction occurs when the firm's only source of financing a positive net present value project is an equity issue. In a Myers and Majluf (1984) world of asymmetric information the value maximizing strategy for the firm is to forego the public equity offering and instead use a stock offer to acquire a firm possessing financial slack. The process is modeled using an extension of the Myers and Majluf (1984) model and demonstrates how the acquisition alternative allows managers to separate the signals regarding the investment and financing decisions. Including net pension assets into our measure of financial slack, we provide empirical supports for the ability of the extended model to explain observed merger activity. Author Affiliation: (1) College of Business and Economics, University of Delaware, Newark, DE, 19716-2712 (2) School of Business Administration, University of Connecticut, Storrs, CT, 06269-2041 (3) School of Economics and Finance, University of Hong Kong, Pokfulam, Hong Kong Article History: Registration Date: 08/10/2004

We use a classroom game, the 'Wallet Game', to show that slight asymmetries between bidders can have very large effects on prices in standard ascending (i.e. English) auctions of common-value objects. Examples of small asymmetries are a small value advantage for one bidder or a small ownership of the object by one bidder. The effects of these asymmetries are greatly exarcabated by entry costs or bidding costs. We discuss applications to Airwaves Auctions and Takeover Battles including the Glaxo-Wellcome Merger. Keywords: Auction theory; Common values; Winner's curse; Takeovers; Mergers, corporate acquisitions; PCS auction; Spectrum auction; Airwaves auction

In The Theory of Business Enterprise in 1904, Thorstein Veblen developed an explanation of the relationship among the rise of a national market, the phenomenon of destructive price competition, and [...]

Legal and economic analytical views of corporate vertical integration by way of mergers has historically been a troublesome issue. The courts and most other analysts have frequently considered vertical restriction by contract and vertical integration by merger as essentially identical and practically indistinguishable. An analytic mathematical model previously used to study vertical contracting is used to investigate the non-equivalent aspects of vertical mergers and vertical contracts., 1. Introduction 1.1. Antitrust Policy and Economic Analysis The issue of vertical relationships has long been problematical in antitrust policy and in related economic analysis. Until the early 1980s, the [...]

We demonstrate how purely anti-competitive horizontal mergers can produce larger gains for merging firms than for non-merging firms. Moreover, these anticompetitive mergers do not promote entry. These findings, which eliminate a long-standing free-rider problem from the previous merger literature, stem from the ability of firms to price discriminate under asymmetric competition. To illustrate, we use a spatial model of consumer preferences. Our results suggest that merger may significantly reduce consumer surplus in markets with certain characteristics, such as those where bidding occurs. Our model also shows that price discrimination facilitates entry deterrence in spatial markets.

The International Business Expansion (IBE) model is used to analyze a case study involving a company in the process of acquiring another firm in another country. The IBE model is proposed as an approach to the selection of a company or country in strategic acquisition studies. Duality, sensitivity analysis and probabilistic data are discussed as tools for use with the model.

A parsimonious descriptive model is developed to represent the corporate merger process as a bargaining game under certainty. The model uses four parameters to estimate coefficients of incremental wealth valuation of acquiring and target companies. Distribution of gains between target and acquiring companies are explained such that they are consistent with the Nash-Kalai axioms. Empirical data from 24 recent corporate mergers is used to test its predictive power using an operational version of the game-theoretic model.

The Analytic Hierarchy Process (AHP) is a method by which firms can evaluate potential acquisition candidates. The model provides a framework for screening against multiple criteria and complex problems. AHP procedures consider the viewpoints of the firm's various stakeholders, allowing for group consensus. Despite imposing a hierarchal structure to the problem, the model lets decision makers choose the factors to be considered and rank them according to relative importance.

An asset valuation model for cross-border acquisitions, mergers, and divestitures is proposed. The model is based on capital budgeting and incorporates characteristics that cause differences in an asset's perceived value. The framework is useful in explaining the increasing numbers of international acquisitions by US firms and is designed for use by foreign firms exploring mergers or acquisitions across international borders.

We develop a model in which the mode of acquisition conveys information concerning the value of bidder. The model incorporates the possibility that offers containing both cash and stock can be made in a setting consistent with the U.S. tax code. We demonstrate that bidders with unfavorable private information about their equity value choose offers containing some stock to avoid the capital gains tax consequences of cash offers. We present evidence consistent with the model. (Reprinted by permission of the publisher.)

A multi-attribute technique for assessing acquisition partners is presented. An acquired and an acquiring firm can be viewed as a two-member subset of multi-attribute items. The firm evaluating a certain number of acquisition candidates should evaluate that many two-member subsets of multi-attribute items. A balance model can be used identify the preferences of decision makers for subsets so that the degree of balance among subset items is reflected. The steps in the implementation of the balance model include identifying the attributes of the acquiring and acquired firms, evaluating the subsets of the profiles of the acquiring and acquired companies, and evaluating candidate companies by using a specific formula. An application of the balance model to the cosmetics industry has shown that the model can provide an appropriate description of the acquisition decision.