The Role of Institutional Investors in Public-to-Private Transactions

In Italy, as in many other European countries, listed firms have gone dark through controlling shareholder-initiated tender offers. We find that the presence of institutional investors, especially when foreign, helps minority shareholders receive a higher takeover premium and reduces the likelihood of a successful bid. We explore the effect of a number of hitherto unexplored factors on the takeover premium and find that shareholder agreements facilitate the public-to-private acquisition. Other factors, such as a threat to merge the target if the bid fails or external validation of the offer price have no impact on either the likelihood of delisting or the premium paid by the bidder.