Toeholds and signalling in takeover auctions

摘要

This paper presents a model of preemptive bidding in takeover auctions with toeholds. It shows that when the first bidder owns a fraction of the target firm he is more likely to deter competition and a smaller jump bid is required to do so. It also shows that in the presence of the toehold, the signalling equilibrium reduces the social surplus while it has no effect on the social surplus in the absence of the toehold.