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Rev Fin 1992; 5:685-708
© 1992 the Society for Financial Studies

Article

Repetition, reputation, and raiding

JC Leach
Department of Finance, Wharton School, Philadelphia, PA 19104-6367, USA

Abstract

I develop a multitarget takeover model with bid revisions, in which bidders desire a reputation for having low valuations. Such a reputation increases the likelihood that future targets will accept low premium bids. Bidders develop reputation by using low take-it-or-leave-it offers. Consequently, tender premiums, bid revision rates, and success rates are lower for continuing bidders than for those considering only a single target. Success rates vary within a series, and reputation building is more likely with highly correlated target valuations. I provide an exploratory empirical analysis consistent with lower premiums from continuing bidders and discuss some resulting implicationis regarding 'raiders', conglomerates, and resistance strategies.


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