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A friendly merger can be structured as a one‐step transaction or a two‐step transaction. For a variety of reasons, such as the fast speed with which two‐step mergers are completed, there are concerns about whether target shareholders are disadvantaged by this structure in comparison with one‐step mergers. The purpose of this paper is to examine the effects of the two types of merger structures from the shareholder point of view.

In order to compare the shareholder wealth effects of merger structure, the authors control for deal and firm characteristics and the endogenous nature of the choice of transaction form. Specifically, the authors follow the literature to use a switching regression framework with endogenous switching to address endogeneity.

No evidence was found of detrimental effects of two‐step mergers on target shareholders. The findings suggest that at least some one‐step mergers could benefit from using the two‐step structure. The authors provide several explanations for the continued use of one‐step mergers.

Although there is some literature on freeze outs of minority shareholders, no one has examined two‐step mergers in comparison with one‐step mergers. The paper's results will be valuable to corporate managers, M&A advisors, regulators, and policy makers.

In recent years, practitioners and academics have argued that traditional discounted cash flow (DCF) valuation models do not adequately capture the value of managerial flexibility to delay, grow, scale down or abandon projects. The insight is that a business investment opportunity can be conceptually compared to a financial option. The purpose of this paper is to develop a theoretical model based on option pricing theory to value managerial flexibility arising in stock for stock exchanges. The paper shows how a mergers and acquisition (M&A) deal may be optimally structured as a real options swap by including managerial flexibility of both the acquiring and target firms when stock prices are volatile. Using a recent acquisition case example from US banking industry the paper illustrates how the proposed exchange ratio swap optimize deal value and avoids earnings per share (EPS) dilution to both parties. Appropriate valuation of managerial flexibility is important given the historical premiums paid in takeovers. While the fact that such premiums exist lends some credibility to the idea that at least implicitly managerial flexibility is valued, the real options approach allows for more explicit valuation of such flexibility.

Drawing attention to the significant number of unsuccessful (abandoned) cross-border merger and acquisition (M&A) transactions in recent years, the purpose of this paper is to analyze three litigated cross-border inbound acquisitions that associated with an emerging economy – India, such as Vodafone-Hutchison and Bharti Airtel-MTN deals in the telecommunications industry, and Vedanta-Cairn India deal in the oil and gas exploration industry. The study intends to explore how do institutional and political environments in the host country affect the completion likelihood of cross-border acquisition negotiations.

Nested within the interdisciplinary framework, the study adopts a legitimate method in qualitative research, that is, case study method, and performs a unit of analysis and cross-case analysis of sample cases.

The critical analysis suggests that government officials’ erratic nature and ruling political party intervention have detrimental effects on the success of Indian-hosted cross-border deals with higher bid value, listed target firm, cash payment, and stronger government control in the target industry. The findings emerge from the cross-case analysis of sample cases contribute to the Lucas paradox – why does not capital flow from rich to poor countries and interdisciplinary M&A literature on the completion likelihood of international takeovers.

The findings have several implications for multinational managers who typically involve in cross-border negotiations. The causes and consequences of sample cases would help develop economy firms who intend to invest in emerging economies. The study also offers some implications of M&A for telecommunications and extractive industries.

Although a huge amount of extant research investigates why M&A fail to create value to the shareholders during the public announcement and post-merger stages, there is a significant dearth of research on the causes and consequences of delayed or abandoned national and international deals. The paper fills this knowledge gap by discussing an in-depth cross-case analysis of Indian-hosted cross-border acquisitions.

The purpose of this paper is to focus on the investigation of the venture capital investment process in the emerging markets of Central and Eastern Europe (CEE), including Hungary, Poland, the Czech Republic, Slovakia, Romania, and Russia. The study aims to describe the mechanics by which venture capital firms operating in the CEE region process deals.

The paper is based on a two‐phase interview interaction process with venture capitalists operating in the CEE region. In the first semi‐structured (exploratory) phase of the study, 14 venture capitalists agreed to participate in one‐hour interview and aimed at discussing their venture capital process. In the second phase of the study (confirmatory), 24 venture capital firms commented on the actual fit of the proposed nine‐stage model into their past investments.

The study has two conclusions. Firstly, the study confirms the existence of a nine‐stage venture capital investment model, comprised of deal origination, initial screening, feedback from the investment committee and due diligence Phase I, feedback from the investment committee (due diligence Phase I), pre‐approval completions, formal approvals and due diligence Phase II, deal completion, monitoring, and exit. Secondly, the proposed model defines the venture capital process in terms of three channels of activity: document channel, information channel, and decision channel.

The study is important for at least four reasons. Firstly, the study focuses on the investigation of the entire venture capital process. Previous research in the area focuses on some specific facets of the venture capital process. Secondly, the paper investigates the connection between decision‐making, information gathering and written communication within a venture capital fund. Thirdly, the study focuses on the most recent period of development of the CEE industry. Many venture capital firms only recently crystallized their venture capital process. Lastly, the study proposes areas of further research for academics and makes suggestions for practitioners.

The purpose of this paper is to investigate the relationship between social-material interaction and the monetary aspects of business relationships in the construction industry. The authors term the formal financial agreements necessary for such activities “deals”, and this paper seeks to open a research avenue to further investigate the multifaceted interaction processes among business actors. The construction industry is a suitable empirical setting for this purpose; its project-based character and societal position of linking business with the construction of essential community infrastructure imply that different types of money-handling activities need to be managed continuously with both short-term and long-term effects taken into account.

To investigate the deals, i.e., the interface between socio-material interaction and the money-handling processes in the construction industry, as well as studying the potential interrelatedness of deals, the authors performed a case study involving three interrelated housing projects in Uppsala, Sweden.

The study shows that deals do not only have an intricate relationship to the social-material interaction processes among construction actors, but they also become interrelated in specific ways to form “deal structures” as actors engage in different business relationships over time. This means, for instance, that a single deal can enable several other deals, and involved actors have different abilities in performing deals. Hence, most deals are part of a “broader” interaction pattern of social and material resources spanning the organizational borders of individual companies.

Within the industrial marketing and purchasing, the socio-material interaction among actors has been well studied, but less attention has been paid to the monetary dimension and its relationship to the socio-material interaction processes. In particular, this study provides an understanding of monetary agreements in the construction industry.

Given that several publicly announced international merger and acquisition deals have been abandoned in recent years, the purpose of this paper is to present a synthesis of influential articles that examine organizational characteristics of cross-border acquisition transactions. The synthesis is framed through general traits and resources, learning and prior acquisition experience, and top-level management and governance attributes. Specifically, the paper conceptualizes key organizational attributes influencing the propensity of cross-border negotiations, and the most common characteristics and post-deal effects by illustrating several case examples from around the world.

Owing to fairness and integrity principles of the literature survey studies, the paper adopts an exploratory review design to present a synthesis of several influential articles published in strategy, international business and corporate finance journals. Since case method and storytelling are the best qualitative approaches to conceptualizing extant theoretical contributions, a number of case examples—successful, delayed and abandoned—from around the world have been discussed by leveraging the case information from archival sources.

Drawing on resource-based view, organizational learning, upper echelons and agency theory perspectives, the paper underscores three observations. First, organizational characteristics such as firm age, firm size, ownership structure, slack resources, marketing resources, technological intensity, export intensity and business group affiliation have different impacts on the propensity of publicly announced cross-border deals. Second, firm’s prior acquisition experience and firm’s acquisition experience in the target country have positive or moderating effects on the success of a cross-border merger. Third, top-level management characteristics such as CEO foreign nationality and CEO international career experience, and governance characteristics such as board size, the number of independent directors and directors with overseas experience, have mixed effects on the incidence of cross-border acquisitions.

The paper puts forth several recommendations for top-level managers participating in cross-border acquisition negotiations, such as learning from peers in the same industry, learning from predecessors in the target country and learning from failure negotiations in the same industry and other industries.

Nested within the organizational, international business strategy and corporate finance literature, the paper presents a synthesis of influential publications that study organizational characteristics affecting the propensity of cross-border acquisitions. The cases discussed in this paper are unique examples from around the world.

The traditional discounted cash flows (DCF) valuation procedure used by financial analysts assumes that firms maintain a policy of fixed debt. However, empirical evidence suggests that many firms rebalance their debt. This paper seeks to explore the implication of this discrepancy for valuation of firms that undergo a capital structure change.

The approach taken is both theoretical and empirical.

The authors show how the valuation process should be modified for firms that are expected to rebalance their debt and demonstrate the distortion in value that results if the traditional DCF valuation procedure is used instead. Furthermore, they illustrate the significance of their results using a sample of the largest largest leveraged buyouts of the current decade.

To the authors' knowledge, this is the first investigation into this issue.

The purpose of this paper is to investigate short‐selling around private investment in public equity (PIPE) issuances, for evidence of manipulative short‐selling by hedge funds.

The authors use the Regulation SHO short‐selling data in combination with information about hedge fund participation in traditional stock PIPE offerings from Sagient Research, and share price and trading volume data from the Center for Research in Security Prices (CRSP) to examine the relations among hedge fund participation, short‐selling levels and stock returns surrounding such offerings.

It is found that significantly less pre‐deal short‐selling occurs when hedge funds are included in the PIPE investor group, and adjusted returns for firms with hedge funds as investors are positive in the pre‐deal period and negative in the post‐deal period. Both of these findings are opposite of the patterns expected given manipulative short‐selling by hedge funds. Pre‐deal and post‐deal adjusted returns and PIPE discount are unrelated to pre‐deal short‐selling by hedge funds, findings inconsistent with manipulative short‐selling by these investors. The evidence suggests that most hedge funds that invest in traditional stock PIPEs do not engage in manipulative short‐selling around these deals.

This paper is the first, to the authors' knowledge, to examine hedge fund participation and daily short‐selling around traditional stock PIPE issuances. Previous studies focus on structured PIPE deals, which do not represent the majority of the PIPE market at present. The daily short selling data used in this study allow for detailed investigation of market behavior not afforded by monthly short interest data used in previous studies.

Luxembourg is the jurisdiction of choice for many private equity and venture capital investors/funds. Though the optimum balance of financing instruments in relation to any structure varies according to its particular circumstances, one factor that all Luxembourg domiciled FDI structures have in common is the requirement for an appropriate level of equity investment. This article intends to summarize some of the topics frequently encountered in relation to equity structuring choices.

Author details the different steps and choices available to investors and funds. The article offers answers to questions to provide a broad, yet detailed, overview of the process and journey; from selecting the vehicle right through to distributing to investors, governance, and compliance.

To avoid an expensive mistake, it is paramount that the private equity or venture capital investors and management team receive detailed advice to ensure: (i) the deal is structured in the most tax efficient manner possible and the commercial deal is suitable for all parties, and (ii) the deal is structured in a manner which is effective under Luxembourg law, for both tax and legal purposes.

It is important that non-Luxembourg lawyers are able to identify key issues when negotiating the terms of the investment documents, in particular, the articles of association and shareholders' agreement.

Practical guidance from Luxembourg lawyer specializing in corporate law, mergers and acquisitions, venture capital and private equity transactions.

This case is designed to teach how to structure information technology (IT) infrastructure outsourcing deals from both the outsourcer and the client perspective. Office Supply Incorporated (OSI) is a company in crisis, with challenges in its cost structure and poor IT performance. Outsourcing to Technology Infrastructure Solutions is an opportunity to both reduce costs and complexity for the firm, but students first must consider whether outsourcing is a good strategic fit for OSI. Detailed spreadsheet templates are given that are based on a real outsourcing client engagement for a major infrastructure outsourcing company. The spreadsheets are complex but have been simplified so that they automatically calculate when populated, allowing the students to quickly move to answering the management challenge: how should TIS price and structure the outsourcing deal? Answering this question provides deep insights into the business case for IT outsourcing and how outsourcers financially engineer a deal structure to ensure a win-win outcome for both the client and outsource service provider.

Students will: Understand the strategic context of IT outsourcing and when it will benefit a firm; Understand IT infrastructure outsourcing and management issues such as personnel reductions and organizational change; Learn which outsourcing pricing model is the best fit for a project; Create a rigorous cost-benefit financial analysis and ROI model for IT infrastructure outsourcing; Analyze the model and learn how to financially engineer the deal to be a win-win for the outsourcer and client.