The Impact of Go-Shop Provisions in Merger Agreements

Authors

S Gogineni, University of Wyoming
J Puthenpurackal, University of Nevada, Las VegasFollow

Document Type

Article

Publication Date

1-1-2017

Publication Title

Financial Management

Volume

46

Issue

1

First page number:

275

Last page number:

315

Abstract

We examine whether go-shop provisions in merger agreements are used to benefit target shareholders or for agency/entrenchment reasons. We find that go-shop provisions are more likely in deals involving the negotiation selling method, financial buyers and all cash financing, and in targets with less valuation uncertainty. We confirm that go-shops have a positive association with the initial offer premium. Results suggest that deals with go-shop provisions are more likely to have a competing bid and an upward revision of the initial offer premium. Collectively, our results indicate that go-shops are effective contractual devices used to further target shareholder interests. © 2016 Financial Management Association International.

Language

english

Repository Citation

Gogineni, S., Puthenpurackal, J. (2017). The Impact of Go-Shop Provisions in Merger Agreements. Financial Management, 46(1), 275-315.
http://dx.doi.org/10.1111/fima.12146