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 512 U.S. M&A transactions. We find the relative size of a deal constitutes a prominent determinant of the loan price measured by the all-in-drawn spread (AIDS). This result is robust to several specifications that address endogeneity concerns. Further analysis demonstrates higher AIDS is associated with lower post-transaction performance. We posit that deal size is a major concern for lenders because it involves greater information risk, greater busi­ness complexity, and more integration difficulties. Further, the loan price correctly factors in the risk of poor post-transaction performance. 

Bibliographical metadata

Original languageEnglish
Place of PublicationRevise & Resubmit
Number of pages44
Publication statusPublished - 23 Aug 2019