The Impact of Publicity Traded Debt on Deal Spread in M&A Deals

Student: Fedorov Konstantin

Faculty: International College of Economics and Finance

Educational Programme: Financial Economics (Master)

Year of Graduation: 2019

In this paper we study the relationship between deal spread that arises during the process of target’s acquisition and the publicly traded debt owned by a target. We believe that the presence of publicly traded debt is a necessary condition for creating incentives for some hedge funds to bet on the M&A deal failure, causing greater deal spread for target firms in cash deals. The empirical analysis of 171 transactions was conducted and the most important determinants of the spread have been analyzed. The results have shown that there is significant positive relationship between presence of publicly traded debt and deal spread during these transactions. However, further analysis has shown that there is poor evidence of relationship between deal spread and liquidity characteristics of such debt issued by target firms.

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