Financial Strategies in Mergers and Acquisitions (M&A): The Case of Regulated Firms

Topics:
Commercial Lending,
Equity,
Mergers
Tags:
Finance,
Financial,
Firm,
Investment,
M&A,
Mergers & Acquisitions
Source:
Universidade do Porto

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Overview: In this paper, a general model of strategic behavior of (regulated and non-regulated) firms in (Mergers and Acquisitions) M&A is presented. For non-regulated firms, the model indicates that targeted firms issue new debt strategically. In this paper, the firm's capital structure is chosen so that it maximizes the (ex-ante) market value of the firm. However, the focus of the paper is on regulated firms (mostly monopolies). For these firms, the model shows that managers, acting on behalf of shareholders, make their strategic decisions on debt issuing and investment, in anticipation of both the decisions of the regulatory body and the responses of financial markets.

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Format: PDF | Size: 199KB | Date: May 2003 | Pages: 21

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