In this post by Professor Afra Afsharipour of the UC Davis School of Law, she discussed what she identifies as the bidder overpayment problem, where bidders often pay more for publicly traded targets due to managerial agency costs and behavioral biases. The article notes that there are less monitoring mechanisms for bidder shareholders than there are for target shareholders to ensure a fair price. For instance, while target shareholders can bring appraisal proceedings in some transactions, bidder shareholders do not receive any appraisal rights even in transactions where they have the right to vote. The author ultimately argues for a “shareholder voice in situations of high importance to firm value and share price.”
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