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On May 18, 2014, AT&T Inc., the second-biggest U.S. mobile-phone carrier, agreed to acquire DirecTV, a satellite-television company, for $49 billion in cash and stock. However, the merger’s conditions and terms are complicated as the stock exchange ratio is contingent on the volume-weighted average AT&T stock price over a 30-day period that is three trading days prior to the date when the merger becomes effective.

Using a contingent claims pricing approach, we model DirecTV’s theoretical value based on the merger’s conditions and terms. It is shown that the theoretical DirecTV stock value is analogous to the sum of the present value of a cash offer, plus owning shares of the AT&T stock, and short volume-weighted average price (VWAP) call spreads. Using three different option-pricing models, DirecTV’s stock valuation model is tested with the market data. Empirical results show that on average, DirecTV’s stock was consistently priced at a discount during the sample period, and Funahashi and Kijima’s (2017) VWAP option model works better than Black and Scholes’ (1973) plain vanilla option model and Levy’s (1992) average-price option model.

We propose a novel method of forecasting the level of informed trading at merger announcements. Informed traders typically take advantage of their knowledge of the forthcoming merger by trading heavily at announcement. They trade on positive volume or informed buys for cash mergers and negative volume or informed sells for stock mergers. In response, market makers set wider spreads and raise prices for informed buys and lower prices for informed sells. As liquidity traders trade on these prices, our vector autoregressive framework establishes the link between informed trading and liquidity trading through price changes. As long as the link holds, informed trading may be detected by measuring levels of liquidity trading. We observe the link during the −1 to +1 period for cash mergers and −1 to +5 period for stock mergers.

Though cross-border acquisitions have grown dramatically in value and frequency in the last ten years, little is known about returns to acquirers or their method-of-payment choice. This paper studies returns to U.S. bidders and their method-of-payment choice for acquisitions of foreign targets. Results indicate that bidder returns are higher for cash offers, for offers to private and subsidiary targets, if there is high insider ownership, and if there is high exchange rate variation. The method-of-payment choice for these bidders is linked to the target country’s legal regime and accounting standards, insider ownership, target type, and value uncertainty.

Financial derivatives markets are a relatively new development globally. In the USA, the first commodity derivatives trading began in Chicago at the Chicago Board of Trade in 1849. However, the first financial derivatives trading did not begin until 1972, when the Chicago Mercantile Exchange began trading futures contracts on seven foreign currencies. These were the world's first official financial futures contracts. In Europe, the oldest financial derivatives market was the London International Financial Futures Exchange, or LIFFE, which began trading financial futures in 1982.

The success of mergers and acquisitions are contingent upon organizational operations, legal structures, and fiscal responsibilities. Each of these areas requires a proper mix of human capital – people – assigned to carry out the objectives and goals of the emerging entity. Within the general knowledge of Mergers and acquisitions (M&As), research focusing upon these aspects of human capital have been lacking. This chapter adds to the current knowledge of M&A human resources by establishing a framework that can direct future research.

Corporate acquisitions have received less attention than the “make-versus-buy” paradigm problem within transaction cost economics. However, recent research that has been conducted on acquisitions is a valuable source of ideas that can be put to use in organizational governance studies more broadly. In this paper, I provide a brief review of the M&A literature with the aim of developing two arguments. First, information economics has provided important theoretical underpinnings for this literature and complements transaction cost economics by emphasizing the ex ante exchange hazards that economic actors face. Second, research using information economics offers the potential to enrich the organizational economics research agenda in strategic management and vice versa.

In a world of asymmetric information between managers and investors, the choice of the payment method is a key issue in mergers and acquisitions. Previous literature shows that contingent methods of payment other than stocks (e.g. contingent value rights, earnouts or convertible securities), even if they do not solve the information asymmetry problems, can mitigate their consequences. In this chapter, I examine the motivations and the effects of the inclusion of a contingent payment method the use of which has not been studied yet, the warrant. I show that this consideration is used mainly when information asymmetry problems are severe and that it can be used to solve the information problems.

Leadership is often challenged to provide a sense of continuity in spite of disruptive changes caused by strategic (managed) and external (un managed) processes. The authors reflect on their experience as organisation development consultants to a multinational merger and integration of three companies – part of a 15-year series of industry re-structuring. The authors focus on one intervention, showing how the situation displayed characteristics common in TV serials (soap operas). The authors describe an intervention informed by this analysis, offerings brief vignettes followed by a more extended explanation of how soap opera norms can be more widely applied to organisation and leader development.