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The paper examines whether pre-bid target stock price runups lower bidder takeover gains and deter short-term toehold purchases in the runup period. A dollar increase in the runup raises the initial offer price by $0.80 (markup pricing). Bidder gains, while decreasing in offer price markups, are increasing in runups, suggesting that runups are interpreted by the negotiating parties as reflecting increases in target stand-alone values. Paper concludes that markup pricing per se is unlikely to deter short-term toehold acquisitions.
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