Anurag Sharma, Ben Branch, Chetan Chawla, Liping Qiu, Ning Pu – Sunday, January 1, 2012
Institutional investors often must decide whether to favor or oppose a proposed acquisition or whether to accept or reject a tender offer. In isolation such decisions are usually straightforward. If a significant premium is offered, a yes vote is probably indicated. But large institutional investors such as a pension fund may own not only stock in one of the involved parties (target or bidder) but the stock and bonds of both companies as well as positions in various related parties including other potential bidders, customers, suppliers and rivals. As such the success or failure of the attempt may have important second order effects which could impact the decision. An even broader set of questions arise if the investor has a relevant social agenda. Herein we explore how a widely diversified investor may be affected by a proposed acquisition.