Increased activity in the Australian mergers and acquisitions market has sparked interest in the timing of, and rationale for, bid acceptance by target shareholders. Several legal commentators have indicated interest in the mechanisms utilised by bidding firms to induce bid take up by target shareholders (Levy, 2005 and Bosmans, 2005). This study provides the first evidence of determinants of bid take up, in Australian takeovers. By doing so, this study provides a better understanding of bid structure such that a bid may be more readily accepted by target shareholders and result in a more efficient bid process.
Takeover data are sourced for successful bids made from January 2001 to December 2004, inclusive, which provides for a total sample of 117 successful takeovers. A logistic regression is employed in order to determine the extent that each identified bid event increases and/or decreases the probability of a spike in bid take up. Acceptance of the bid by target directors and the announcement that the bid is free from conditions are found to have a positive relation with the probability of a spike in bid take up. Conversely, the existence and persistence of a competing bid reduces the probability of an observable spike in bid take up. These findings are robust to a number of sensitivity and additional analyses. The primary implication of this study, in a practical context, is to inform professionals as to the success of particular bid inducement strategies. Additionally, the findings provide a better understanding of the bid process, to academics and practitioners alike. This is in addition to providing evidence of the average timing of certain bid events that occur during the bid process and, the strength of the relation between these events and bid take up.