Bidders in hostile takeovers have colluded in five separate instances. It is found that these collusive agreements did not affect the target's price significantly. A model is developed to explain this observation. A welfare analysis indicates that a positive probability of cartel formation can be socially beneficial and may or may not be beneficial to the target's shareholders, depending on the process generating takeover attempts. This sheds light on the existing policy debate concerning regulations of collusive agreements.
Collusive Bidding in Hostile TakeoversPreston R. McAfee, Daniel R. Vincent, Michael A. Williams, and Melanie Williams Havens ,
4( 2 )
Journal of Economics and Management Strategy