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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


University of Cambridge

June 29, 2012


Abstract:     
Cash- and stock-financed takeover bids induce strikingly different target revaluations. We exploit detailed data on unsuccessful takeover bids between 1980 and 2008, and show that targets of cash offers are revalued by 15% after deal failure, whereas stock targets return to their pre-announcement level. Employing the news-search classification of Savor and Lu (2009), we find that this result holds when failure is exogenous to the target's stand-alone value. The differences in revaluation do not revert over longer horizons. We analyze the role of future takeover activities in explaining these differences. Compared to a set of matched control firms, the targets of failed cash and stock offers are both more likely to be acquired over the following 8 years. Between cash and stock targets, however, we find no differences in the timing or the value of future offers. Our results suggest that cash bids reveal positive information about the stand-alone value of the target.

Number of Pages in PDF File: 42

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

JEL Classification: G14, G34, D03, D82

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Date posted: March 15, 2011 ; Last revised: July 19, 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
University of Cambridge ( email )
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
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