AN EXAMINATION OF BIDDER FEES AND THE EFFECT ON FIRM RETURNS

Open Access
Author:
Maiello, Alfred Brandon
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Jason Kotter, Thesis Supervisor
  • Brian Davis, Honors Advisor
Keywords:
  • M&A
  • Bidder Fee
  • Reverse Termination Fee
  • merger and acquisition
Abstract:
Bidder fee use starts to increase in the mid-2000s and takes the private equity and legal landscape by storm during the Great Recession. Bidder fees were infrequently studied, but with their rise in use, finance and legal scholars have started to explore bidder fees. The study examines if bidder fees are used to transfer regulatory risk from the target firm to the bidding firm. The results do not indicate that this is the case, in fact the study results oppose that hypothesis. The study investigates if bidder fees increase target returns and decrease bidder firm returns at announcement. The findings indicate that a bidder fee decrease target returns and the effect on the bidder firm is indeterminable.