Fwd: Money Stuff: Shareholders Like Any Old Merger

In practice acquirers sometimes make acquisitions for bad, non-economic reasons. The chief executive officer of the acquirer thinks it would be fun to run a bigger company (because it makes her feel more important, or because it will allow her to demand higher pay), so she buys up other companies to make hers bigger. And a target may accept or reject an offer for bad reasons: Its CEO is tired of running the company and wants to cash out with a big golden parachute, so she takes a bad offer, or its CEO likes running a company (and feeling important and getting a paycheck), so she refuses an offer that is better than the company’s standalone prospects. (View Highlight)

Note: great example of Principal Agent problem