A Theory for the Choice of Exchange Medium in Mergers and Acquisitions

Although there is wide interest among academics, business people, and the general public on the subject of mergers and acquisitions, little formal research has been done on the negotiating/ auction process whereby transactions in the socalled market for corporate control are actually effected.' Even less work exists concerning the means of payment chosen in any transaction.2 This lack of understanding is particularly lamentable in consideration of the large literature on value gains in mergers: one would expect that a better understanding of the transacting process,