The Consequence of Takeover Methods: Schemes of Arrangement vs. Takeover Offers

Alqobali, Hala; Li, Daniel

Abstract

This paper examined the effect of two selling processes in the UK market: takeover offers and schemes of arrangement. The latter is argued to allow a bidder to acquire a target company more cheaply and easily because schemes provide a lower threshold of the target company’s shares before “squeeze-out” procedures may be used. To address potential self-selection bias arising from bidders’ ability to choose their acquisition method, the propensity score matching methodology was applied to 803 takeovers of listed-target firms from 1995–2018. The results showed that the scheme of arrangement significantly reduces the target shareholders’ gain relative to the takeover offer.

• Journal Article Type: Article
• Acceptance Date: Aug 8, 2022
• Online Publication Date: Aug 16, 2022
• Publication Date: 2022
• Deposit Date: Dec 5, 2022
• Publicly Available Date: Dec 6, 2022
• Journal: International Journal of Financial Studies
• Publisher: MDPI
• Peer Reviewed: Peer Reviewed
• Volume: 10
• Issue: 3
• DOI: https://doi.org/10.3390/ijfs10030069
• Public URL: https://durham-repository.worktribe.com/output/1185104