Preemptive Bidding and the Role of the Medium of Exchange in Acquisitions

Michael Fishman*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

255 Scopus citations


The medium of exchange in acquisitions is studied in a model where (i) bidders' offers bring forth potential competition and (ii) targets and bidders are asymmetrically informed. In equilibrium, both securities and cash offers are observed. Securities have the advantage of inducing target management to make an efficient accept/reject decision. Cash has the advantage of serving, in equilibrium, to “preempt” competition by signaling a high valuation for the target. Implications concerning the medium of exchange of an offer, the probability of acceptance, the probability of competing bids, expected profits, and the costs of bidders are derived. 1989 The American Finance Association

Original languageEnglish (US)
Pages (from-to)41-57
Number of pages17
JournalThe Journal of Finance
Issue number1
StatePublished - Jan 1 1989

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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