Scheme of Arrangement in the UK Takeover Market: Does it Make a Difference in Firms’ Survival to be Tendered?

Hala  Alqobali; Maha  Alandejani

doi:10.36941/ajis-2022-0126

Authors

Hala Alqobali Economics Department, Faculty of Economics and Administration, King Abdulaziz University, Jeddah 21589, Saudi Arabia
Maha Alandejani Economics Department, Faculty of Economics and Administration, King Abdulaziz University, Jeddah 21589, Saudi Arabia

DOI:

https://doi.org/10.36941/ajis-2022-0126

Keywords:

Survival analysis, scheme of arrangement, tender offer, continuous-time model, discrete-time model

Abstract

Compared with tender offers, bidders can easily obtain target firms in the scheme of arrangements. This study investigates the impact of deal and target characteristics on 803 firms’ survival to be taken over by a scheme of arrangement or a tender offer in the UK takeover market, during the 1995 to 2018 period, through applying survival analysis, including continuous (PH Cox, Weibull) and discrete-time (complementary log-log) hazard models. The findings indicate that the explanatory variables of target and deal characteristics play a significant role in both the scheme of arrangement and tender offer deals. Firm size, financial crises, the takeover Code shock, and the termination fees paid by a target firm increase the probability of a takeover of the target firm to be implemented by way of a scheme. Acquirers who are publicly listed and own a large stake in the target firm before the takeover intend to reduce the target firm’s probability of being schemed.

Received: 21 April 2022 / Accepted: 15 August 2022 / Published: 2 September 2022