Evaluating and executing a tender offer - A case study on factors allowing Private Equity firms to outbid strategic buyers in tender offer processes.pdf

Sammanfattning: This paper describes a case study of the Private Equity firm Nordic Capital's buyout of Munters, which was completed in competition with the industrial firm Alfa Laval in 2010. The study aims to identify what factors allow Private Equity firms to outbid strategic buyers in tender offer processes. Using both corporate valuation theory and game theoretic research, we study how differences in how the bidders assess the value of Munters as well as in their actions during the tender offer process impacted its outcome. Reconstructing the bidders' valuation models, we show that Nordic Capital included significantly larger operational improvements in their valuation than Alfa Laval did. Further, we find that the activities of the selling and bidding parties during the tender offer process impacted the bidders' relative competitive advantage. Our conclusions highlight the importance of taking the bidding process into account in order to achieve an in-depth understanding of the outcome of tender offer processes.