![]() ![]() We have no bibliographic references for this item. It also allows you to accept potential citations to this item that we are uncertain about. This allows to link your profile to this item. If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. Stapled financing how to#See general information about how to correct material in RePEc.įor technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:52:y:2017:i:02:p:677-703_00. ![]() ![]() You can help correct errors and omissions. Stapled financing full#The full paper is available for download here.All material on this site has been provided by the respective publishers and authors. In our paper, we discuss (informal) explanations for the popularity of stapled finance that practitioners provide, and how our results differ from predictions that follow from those explanations. However, the institutional details about stapled finance are consistent with our results. It also suggests that stapled finance loans that investment banks and other financial institutions retained on their balance sheets should perform worse than buyout loans that were negotiated independently.īeing a fairly recent creation, stapled finance has not yet entered the academic mainstream, and therefore there is little existing empirical research. This suggests that stapled finance that benefits the seller can be arranged only if it is possible to compensate the investment bank for its expected loss, for example with an up-front fee, or by retaining it for other fee-based services. The reason is that stapled finance is optional, so it is accepted only if the terms are attractive to the bidder-and therefore unattractive to the lender. In addition, we show that if the stapled finance package is designed optimally, then the investment bank providing it expects not to break even. Our arguments do not rely on financial constraints of any sort stapled finance is accepted by bidders for strategic reasons, even if they have sufficient internal or outside funds to pay for an acquisition. Third, there are bidders who plan to hold the target as a portfolio company, i.e., who do not plan to integrate it into their other operations if they win. Second, the stapled finance is a non-recourse claim, i.e., the debt is supported only by the target’s assets and cash flow, not by the other assets and operations that the winning bidder owns. ![]() First, the stapled finance offer is optional: the winning bidder has the right, but not the obligation, to accept a loan whose terms have been fixed before the takeover contest started. Three characteristics are crucial for this to be beneficial for the seller. We show that an appropriately designed stapled finance package increases the expected price that will be paid to the seller. We show that arranging stapled finance affects the bidding itself, by making it more competitive. Stapled finance provides for credit at pre-specified terms to whoever wins the bidding contest for the asset or firm that is being put up for sale but the winner is under no obligation to accept the loan offer. In our recently accepted Journal of Finance paper, Stapled Finance, we investigate the relatively new, but now quite common occurrence of a loan commitment that is “stapled” onto an offering memorandum by the investment bank advising the seller in an M&A transaction. ![]()
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