Acquisitions Through a Behavioural and Real Options Lens

Research output: Types of ThesisDoctoral ThesisInternal


This dissertation combines four studies that contribute to our understanding of corporate acquisitions by taking a behavioural and real options perspective. Chapter 2 classifies acquisitions based on real option characteristics and shows option type (single vs. compound) and option nature (shared vs. proprietary) influence the value and premium paid in acquisitions. Chapter 3 considers a specific serial acquisition strategy aimed at industry consolidation and finds higher premiums are paid for first deals in the sequence, showing part of the potential future value generated in the consolidation strategy is already reflected at the start. Chapter 4 takes a behavioural perspective and shows a stock¿s historical high influences the risk firms take in their acquisitions. Firms with a larger deviation from their past stock price high initiate relatively larger deals, but are unsuccessful in their effort to return to prior stock price levels. Finally, chapter 5 merges real option theory, behavioural theory and acquisitions by considering the influence of executive level behavioural biases on the perception of acquisition outcome uncertainty. Given the uncertainties surrounding acquisitions, staging the investment through the initial purchase of a minority stake is beneficial as it allows deferring the full acquisition until outcome uncertainty has decreased. However, behavioural biases can cause disparities between perceived and actual uncertainty, resulting in inconsideration of a staged investment strategy. These insights provide a new explanation for the limited number of observed minority stake purchases prior to full-scale acquisitions.
Original languageEnglish
Awarding Institution
  • Erasmus University Rotterdam
  • Smit, Han, Supervisor
  • Verwijmeren, Patrick, Doctoral committee member
  • Reus, Taco, Doctoral committee member
  • Tong, Doctoral committee member
Award date5 Dec 2013
Place of PublicationRotterdam
Print ISBNs9789058923479
Publication statusPublished - 5 Dec 2013


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