Title: Optimal stake acquisition: explaining heterogeneity in ownership share transactions
Abstract: This paper makes the ﬁrst attempt to rationalize the observed heterogeneity in the corpo-rate acquisitions, in terms of ownership share acquired in the transaction. The paper models the optimal choice of the acquiring company, in forms of percentage of shares to buy in a target ﬁrm. The buyer trades-oﬀ the expected proﬁts and the potential bail-out costs, that may have to aﬀord in order to rescue the target, in case of distress, where both revenues and costs are function of the acquired stake. By adopting a structural framework, the model is able to explain the variation in the stake acquisition, on a continuous set of values up to 100%. The model is calibrated to a benchmark sample of ownership share transactions. A statistical analysis is performed to compare the model predictions and the observed sample, showing a good ability of the model in replicating the real data.