M&A processes, information gathering and transaction costs Abstract

M&A processes, information gathering and transaction costs

Abstract:

This article describes how agents confront high transaction costs in private M&A negotiations when having to provide for missing elements already existing in an organized public market, and in particular the need for complex future’s contracs given the existing time gap between agreements and execution.
Costly negotiations in private M&A deals where private information is manipulated can be rationalized as investments by agents in updating information on key parameters. Hence, they adjust to non cooperative dynamic games with private information on synergies and on market prices offered by competitors. Under high competition, sellers are expected to appropriate buyers’s synergies in accordance with observed marked data. Nevertheless, synergies are ex-ante expected by buyers, justifying recurrent buyers behaviour.

Keywords: M&A; processes: information: negotiations: M&A paradoxes: game theory: non-cooperative games; synergies.