Loan price in Mergers and Acquisitions

Research output: Working paper

Abstract

We investigate loan price in mergers and acquisitions (M&As), using hand-matched loan information for a sample of 330 U.S. M&A transactions. We find the loan price measured by the all-in-drawn spread (AIDS) increases signicantly with the relative size of a deal and decreases with the proportion of stocks offered in the consideration. These results are robust to several specications that address endogeneity concerns. We posit that deal size is a major concern for lenders because it involves more uncertainties, greater business complexity, and greater integration diffculties. Further, the contingent pricing mechanism built in stock offers signicantly lowers the lender's concerns.

Bibliographical metadata

Original languageEnglish
Place of PublicationRevise & Resubmit
Number of pages38
Publication statusPublished - 2018