Abstract

This study examines the motivations behind the bidders' second tender offers for a sample of 366 bidders who made a first attempt over the period of 1976-1990. In both the short-term and the long-term, bidders do not experience a significant abnormal return. As the bidders do not earn a significant gain from their first tender offer attempts, the motivations for making another tender offer attempt are examined. A multinomial logit model is used to examine the rationales for bidders attempting a second acquisition. The results are consistent with the management entrenchment and the convergence-of-interest hypotheses. Also, a binary logit model is applied to examine the probability of the bidders becoming involved in acquisitions in the five years after their first tender offer attempts. We find that bidders with good management performance, small initial offer premium, and high dividend payouts are more likely to become involved in subsequent acquisition activity. Finally, the Cox Proportional Hazard model is estimated to incorporate the time dimension. This model examines the probability of bidders becoming involved in a subsequent acquisition activity in the two years and the five years following their first tender offers. Market variables and financial variables are highly significant in explaining the probability of bidder involvement in subsequent acquisition activity in the two-year model, whereas only financial variables are highly significant in the five-year model.