Hukkanen, PetriKeloharju, Matti2015-11-032015-11-03Hukkanen, Petri, and Matti Keloharju. "Initial Offer Precision and M&A Outcomes." Harvard Business School Working Paper, No. 16-058, November 2015.http://nrs.harvard.edu/urn-3:HUL.InstRepos:23481356Building on recent research in social psychology, this paper analyzes the link between the precision of initial cash offers and M&A outcomes. About one-half of the offers are made at the precision of one or five dollars per share, and an additional one-third at the precision of half dollar or one quarter. The practice of making offers at round price-per-share levels is associated with the following unfavorable outcomes for the bidder: (1) higher purchase price for target shares, (2) lower probability to complete the deal, and (3) lower announcement return. A median-sized offer made at the precision of one or five dollars per share is associated with a 4−5 million dollars higher expected transaction price than one made at a precision greater than one quarter.en-USResearch Paper or Report2015-11-0310.2139/ssrn.2490538