Applying "Financing and takeovers" by Morellec and Zhdanov (2008) to a Real-life Case: A Thesis About Capital Structure in a Merger Context

Tuva Firing Sollid & Louise Karete Bergh Heidal

Student thesis: Master thesis


The purpose of this thesis was to create a model based on the article “Financing and takeovers” by Morellec and Zhdanov (2008) and explore whether this model could be applied to a real-life case. We have compared the theoretical equity value with the observed market value. The model of Morellec and Zhdanov (2008) considers the role of leverage in a takeover contest, jointly determining financing strategies and the timing and terms of the takeover. We developed our own model based on this framework, by changing it from a cash flow approach to a firm value approach, using simple linear regressions. We extended the model to include fixed costs and made a set of assumptions to answer our problem statement. Our results showed a 25% difference between the theoretical equity value and the observed market value. Based on these results it can seem that our model is applicable for the real-life case used in our thesis, although additional testing with other real-life cases is necessary to draw a final conclusion.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2018
Number of pages90
SupervisorsKristian Miltersen