Winery Industry

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The process of negotiation

Both Starshine and IB offered Bel Vino 1.03 new SS shares and $40 per share respectively at the beginning of negotiation, but Bel Vino rejected both offers. Then, Bel Vino offered SS 1.33 new Bel Vino shares, while IB again attempted to purchase Bel Vino for $45 per share this time. Unfortunately, this bid from Bel Vino to SS and offer from IB to Bel Vino did not proceed as well. In spite of increasing the amount of offer to Bel Vino, $47 per share, Bel Vino did not think that it was an enough value for itself, so IB tried to acquire SS for $55 and $60 per share at a time after being rejected by Bel Vino. At the same time, Bel Vino again offered the same 1.33 new shares to SS. After breaking down the IB’s offer, SS proposed to offer them $80 per shares, which exceeded IB’s reservation price of SS, $71.54, whereas Bel Vino requested $51 much closer to the reservation price of Bel Vino than the price SS requested. Therefore, IB offered $50 per share to acquire Bel Vino and both of companies negotiated the deal at $50 per share.

The market reaction

Starting off with the first bid made by SS to Bel Vino, both of mid-size companies’ stock prices went up. However, the stock price of SS decreased because of the possibility to be left out of the deal when IB joined M&A negotiation, offering Bel Vino $40 per share. Since Bel Vino rejected every offer, SS became stable, while IB’s stock price dropped a bit. Once Bel Vino made a bid to SS, IB went down again due to the chance of failure to acquire either of companies, so IB offered Bel Vino $45 per share and $47 per share the other time, which caused SS’s stock price to fall down. Next, the followings caused Bel Vino’s stock value to hit the bottom: the IB’s attempt to acquire SS at $55 per share, the withdrawal of the IB’s offer to Bel Vino, and another withdrawal of the bid to SS taken by Bel Vino. After being rejected, IB again proposed $60 per share to SS, which bumped SS’s value up, but SS did not negotiate. While Bel Vino’s value dropped down, IB made an offer to Bel Vino that led Bel Vino’s stock to go up and SS’s stock to go down. Finally, Bel Vino’s stock price hit $50 per share, whereas SS’s value fell down extremely.