This paper studied how the auction processis influenced by bankruptcy probability, bankruptcy cost, and the corporatetax rate. The study found thatthe bidding price of the management is negatively associated with bankruptcy cost and probability, and positivelyassociated with the corporate tax. However, the expected profit of the outside investor is positivelyassociated with bankruptcy cost and probability, and negatively associated with the corporate tax. When the bankruptcy cost and probabilityis high enough, the acquisition market would be totally inefficient.