Effective Post-Signing Market Check or Window Dressing? The Role of Go-Shop Provisions in M&A Transactions

Jin Q. Jeon, Cheolwoo Lee

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

This paper examines the use of go-shop provisions in M&A. We find that go-shop deals tend to have higher deal premiums and receive more competing bids while the length of the go-shop period does not affect deal premium and competition. Also, deals are less likely to be completed when a go-shop provision is included and when the go-shop length is longer. However, go-shops have no effect on the completion of high premium deals. We also find that the presence of a go-shop provision leads to a positive market reaction to deal announcements. Overall, our findings support the proposition that go-shops reflect the efforts of target managers to fulfill the Revlon duties in the form of a post-signing market check, which is consistent with stewardship theory.

Original languageEnglish
Pages (from-to)210-241
Number of pages32
JournalJournal of Business Finance and Accounting
Volume41
Issue number1-2
DOIs
StatePublished - Jan 2014

Keywords

  • Deal protection
  • Go-shop
  • Mergers and acquisitions
  • No-shop
  • Revlon duties

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