Research On Target Firm's Merger Timing Of Duopoly

Merger is an important investment behavior of firm.Successful merger can help firm's development,and the choice of merger timing is where the shoe pinches.In this thesis,the timing of firm's merger under uncertainty is studied.Based on the existing literatures,the strategic merger timing of two symmetric firms and two asymmtric firms are mainly discussed in the real options and game-theoretic framework.The main conclusions and contributions of this thesis are as follows.First,as the foundation of this thesis,the merger strategy of the monopoly is analysed. Considering the uncertainty of relative cash flow and the negotiation time of merger,the acquiring firms' investment value function,optimal investment threshold and optimal investment timing are derived by using the optimal stopping theory.Second,the strategic merger timing of two symmtric firms are discussed.In addition to considering the double uncertainty of relative cash flow and the negotiation time of merger,the competition of the acquiring firms is taken into account,then the symmetric duopoly option-game model is established.The value functions and investment thresholds of the acquiring firms in different conditions are derived by using relative knowledge of option games theory.Third,the stategic merger timing of two asymmetric firms are discussed.In addition to considering the double uncertainty and competition,the asymmetry of acquiring firms' strength and the incomplete information about the hazard rate of merger are taken into account,then the asymmetric duopoly option-game model is established.The value functions and investment thresholds of the acquiring firms in different conditions are derived.Finally,the merger timing of firms in the case of monopoly and duopoly is derived via actual examples,and the possible equilibriums of firm's timing games in the case of duopoly are discussed.In the case of symmetric duopoly,two kinds of equilibriums can be formed in the investment timing game of acquiring firms:one is leader-follower equilibrium,in which each acquiring firm wants to preempt its competitor to invest,and the result is that two firms invest in turn,the firm who invest first becomes leader,the other firm becomes follower,and competition will accelerate investment;the other is joint investment equilibrium,in which no acquiring wants to invest first,and the result is that two firms invest jointly,and competition will not accelerate investment,but will decelerate investment.In the case of asymmetric duopoly,also two kinds of equilibriums can be formed in the investment timing game of acquiring firms:one is preemption equilibrium,in which each acquiring firm wants to preempt its competitor to invest,and the result is that two firms invest in turn and become leader and follower respectively,and competition will accelerate investment;the other is joint ordinal equilibrium,in which only one firm wants to preempt its competitor,and the result is that the leader firm invests at its monopoly threshold,the other firm invests later and becomes follower, and competition will not accelerate investment,but will decelerate follower firm's investment..