Merger negotiations with stock market feedback

Merger negotiations routinely occur amidst economically significant a target stock price runups. Since the source of the runup is unobservable (is it a target stand-alone value change and/or deal anticipation?), feeding the runup back into the offer price risks "paying twice" for the target shares. We present a novel structural empirical analysis of this runup feedback hypothesis. We show that rational deal anticipation implies a nonlinear relationship between the runup and the offer price markup (offer price minus runup). Our large-sample tests confirm the existence of this nonlinearity and reject the feedback hypothesis for the portion of the runup not driven by the market return over the runup period. Also, rational bidding implies that bidder takeover gains are increasing in target runups, which our evidence supports. Bidder toehold acquisitions in the runup period are shown to fuel target runups, but lower rather than raise offer premiums. We conclude that the parties to merger negotiations interpret market-adjusted target runups as reflecting deal anticipation.Merger negotiations; stock market feedback

Merger Negotiations and the Toehold Puzzle

The substantial control premium typically observed in corporate takeovers makes a compelling case for acquiring target shares (a toehold) in the market prior to launching a bid. Moreover, auction theory suggests that toehold bidding may yield a competitive advantage over rival bidders. Nevertheless, with a sample exceeding 10,000 initial control bids for US public targets, we show that toehold bidding has declined steadily since the early 1980s and is now surprisingly rare. At the same time, the average toehold is large when it occurs (20%), and toeholds are the norm in hostile bids. To explain these puzzling observations, we develop and test a two-stage takeover model where attempted merger negotiations are followed by open auction. With optimal bidding, a toehold imposes a cost on target management, causing some targets to (rationally) reject merger negotiations. Optimal toeholds are therefore either zero (to avoid rejection costs) or greater than a threshold (so that toehold benefits offset rejection costs). The toehold threshold estimate averages 9% across initial bidders, reflecting in part the bidder\u27s opportunity loss of a merger termination agreement. In the presence of market liquidity costs, a threshold of this size may well induce a broad range of bidders to select zero toehold. As predicted, the probability of toehold bidding decreases, and the toehold size increases, with the threshold estimate. The model also predicts a relatively high frequency of toehold bidding in hostile bids, as observed. Overall, our test results are consistent with rational bidder behavior with respect to the toehold decision

Merger Negotiations with Stock Market Feedback

Do preoffer target stock price runups increase bidder takeover costs? We present model-based tests of this issue assuming runups are caused by signals that inform investors about potential takeover synergies. Rational deal anticipation implies a relation between target runups and markups (offer value minus runup) that is greater than minus one-for-one and inherently nonlinear. If merger negotiations force bidders to raise the offer with the runup—a costly feedback loop where bidders pay twice for anticipated target synergies—markups become strictly increasing in runups. Large-sample tests support rational deal anticipation in runups while rejecting the costly feedback loop

Identification of a novel BET bromodomain inhibitor-sensitive, gene regulatory circuit that controls Rituximab response and tumour growth in aggressive lymphoid cancers.: CYCLON-induced Rituximab resistance

International audienceImmuno-chemotherapy elicit high response rates in B-cell non-Hodgkin lymphoma but heterogeneity in response duration is observed, with some patients achieving cure and others showing refractory disease or relapse. Using a transcriptome-powered targeted proteomics screen, we discovered a gene regulatory circuit involving the nuclear factor CYCLON which characterizes aggressive disease and resistance to the anti-CD20 monoclonal antibody, Rituximab, in high-risk B-cell lymphoma. CYCLON knockdown was found to inhibit the aggressivity of MYC-overexpressing tumours in mice and to modulate gene expression programs of biological relevance to lymphoma. Furthermore, CYCLON knockdown increased the sensitivity of human lymphoma B cells to Rituximab in vitro and in vivo. Strikingly, this effect could be mimicked by in vitro treatment of lymphoma B cells with a small molecule inhibitor for BET bromodomain proteins (JQ1). In summary, this work has identified CYCLON as a new MYC cooperating factor that autonomously drives aggressive tumour growth and Rituximab resistance in lymphoma. This resistance mechanism is amenable to next-generation epigenetic therapy by BET bromodomain inhibition, thereby providing a new combination therapy rationale for high-risk lymphoma

Halloween, Organization, and the Ethics of Uncanny Celebration

This article examines the relationship between organizational ethics, the uncanny, and the annual celebration of Halloween. We begin by exploring the traditional and contemporary organizational function of Halloween as ‘tension-management ritual’ (Etzioni, Sociol Theory 18(1):44–59, 2000) through which collective fears, anxieties, and fantasies are played out and given material expression. Combining the uncanny with the folkloric concept of ostension, we then examine an incident in which UK supermarket retailers made national news headlines for selling offensive Halloween costumes depicting ‘escaped mental patients’. Rather than treating this incident as a problem of moral hygiene—in which products are removed, apologies made, and lessons learned—we consider the value of Halloween as a unique and disruptive ethical encounter with the uncanny Other. Looking beyond its commercial appeal and controversy, we reflect on the creative, generous, and disruptive potential of Halloween as both tension-management ritual and unique organizational space of hospitality through which to receive and embrace alterity and so discover the homely within the unheimlich

The Stock Market Evaluation of IPO-Firm Takeovers

We conduct an event study to assess the stock market evaluation of public takeover announcements. Unlike the majority of previous research, we specifically focus on acquisitions targeted at newly public IPO-firms and show that the stock market positively evaluates these M&As as R&D. However, bidders' abnormal announcement returns are significantly lower for takeovers directed at targets with critical intangible assets and innovative capabilities inalienably bound to their initial owners than for those that have internally accumulated respective resources and capabilities. We explain these findings with the acquirer's post-acquisition dependence on continued access to the IPO-firm founders' target-specific human capital. Our results contribute to literature in that they show that the stock market perceives these potential impediments to successful exploitation of acquired strategic resources and thus identify a potential cause for heretofore mostly inconsistent evidence on bidder abnormal returns in corporate takeovers found in previous research

Determinants of Cross-Border M&As and Shareholder Wealth Effects in a Globalized World

We analyze theoretical insights and empirical regularities related to factors determining the cross-border mergers and acquisitions (M&As) and impact of M&As on shareholder value of acquires and targets. The analysis of cross-border M&As is a relatively new subject and only recently received rigorous attention in academic research. Within this nascent literature, the survey pays particular attention to the emerging markets, which, in line with their growing role of in the global economy, became an increasingly important arena for cross-border M&As. The existing evidence point out to prevailing challenges in studying cross-border M&As by emerging markets firms. The results are often contradictory and tend to focus on a single country falling short of formally testing existing theories or developing comprehensive theories for emerging economies. We show that the type of factors increasing the value enhancing effects of M&As tends to be similar to the factors affecting the likelihood of M&As transactions. The remaining methodological challenges for the existing studies are related to strong evidence with respect to nonrandom selection of acquisition targets, which, among other “selection issues,” has important implications for choosing counterfactual evidence in order to appropriately compare pre- and postacquisition performance of firms

Enhanced killing of androgen-independent prostate cancer cells using inositol hexakisphosphate in combination with proteasome inhibitors

Effective treatments for androgen-independent prostate cancer (AIPCa) are lacking. To address this, emerging therapeutics such as proteasome inhibitors are currently undergoing clinical trials. Inositol hexakisphosphate (IP6) is an orally non-toxic phytochemical that exhibits antitumour activity against several types of cancer including PCa. We have previously shown that treatment of PC3 cells with IP6 induces the transcription of a subset of nuclear factor-κB (NF-κB)-responsive and pro-apoptotic BCL-2 family genes. In this study, we report that although NF-κB subunits p50/p65 translocate to the nucleus of PC3 cells in response to IP6, inhibition of NF-κB-mediated transcription using non-degradable inhibitor of κB (IκB)-α does not modulate IP6 sensitivity. Treatment with IP6 also leads to increased protein levels of PUMA, BIK/NBK and NOXA between 4 and 8 h of treatment and decreased levels of MCL-1 and BCL-2 after 24 h. Although blocking transcription using actinomycin D does not modulate PC3 cell sensitivity to IP6, inhibition of protein translation using cycloheximide has a significant protective effect. In contrast, blocking proteasome-mediated protein degradation using MG-132 significantly enhances the ability of IP6 to reduce cellular metabolic activity in both PC3 and DU145 AIPCa cell lines. This effect of combined treatment on mitochondrial depolarisation is particularly striking and is also reproduced by another proteasome inhibitor (ALLN). The enhanced effect of combined MG132/IP6 treatment is almost completely inhibited by cycloheximide and correlates with changes in BCL-2 family protein levels. Altogether these results suggest a role for BCL-2 family proteins in mediating the combined effect of IP6 and proteasome inhibitors and warrant further pre-clinical studies for the treatment of AIPCa