Abstract

http://ssrn.com/abstract=1785942
 
 

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Target Revaluation after Failed Takeover Attempts - Cash versus Stock


Ulrike Malmendier


University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Marcus M. Opp


University of California, Berkeley - Finance Group

Farzad Saidi


New York University (NYU)

June 29, 2012


Abstract:     
Our paper analyzes revaluation and subsequent takeover activity of targets involved in failed takeover attempts between 1980 and 2008. Targets of cash offers are revalued by 15% after deal failure, whereas stock targets revert to pre-announcement levels. This result also holds for deals where failure is exogenous to the target's stand-alone value employing the news-search classification of Savor and Lu (2009). Targets of previously failed transactions are significantly more likely to be taken over relative to matched control firms over a horizon of up to 7 years. However, despite differential revaluation, cash and stock targets exhibit similar subsequent takeover activity as measured by the timing and valuation of future offers. We also do not find evidence for differential stock market performance post failure, even for targets that remain independent. These results are consistent with theories in which the medium of exchange partially signals information about the stand-alone value.

Number of Pages in PDF File: 46

Keywords: mergers & acquisitions, synergies, misvaluation, revaluation, medium of exchange

JEL Classification: G14, G34, D03, D82

working papers series


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Date posted: March 15, 2011 ; Last revised: January 5, 2014

Suggested Citation

Malmendier, Ulrike and Opp, Marcus M. and Saidi, Farzad, Target Revaluation after Failed Takeover Attempts - Cash versus Stock (June 29, 2012). Available at SSRN: http://ssrn.com/abstract=1785942 or http://dx.doi.org/10.2139/ssrn.1785942

Contact Information

Ulrike Malmendier
University of California, Berkeley - Department of Economics ( email )
549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
(510) 642-8724 (Phone)
(510) 642-6615 (Fax)
HOME PAGE: http://www.econ.berkeley.edu/~ulrike/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=918
Marcus M. Opp (Contact Author)
University of California, Berkeley - Finance Group ( email )
Haas School of Business
545 Student Services Building
Berkeley, CA 94720
United States
Farzad Saidi
New York University (NYU) ( email )
Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States
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