Will Multiple Acquirers Ever Learn? The US Evidence from Single versus Multiple Acquirers

Abstract:     
The literature on multiple acquirers is confined to a few studies, none of which compares the performance of single and multiple acquirers in the US market. This study considers shareholder returns for a large sample of 16,221 US takeovers between 1985 and 2004. It finds that single acquirers outperform multiple acquirers by 1.66%, and that the gap widens to nearly 5% in equity exchange offers. In contrast to multiple acquirers, single acquirers generate higher returns in equity deals than in cash and mixed offers, which is due to the high returns earned through the acquisition of non-public targets. Returns for multiple acquirers remain positive through the fourth merger deal. Unsuccessful first time acquirers learn but successful first time bidders suffer from hubris behaviour in subsequent acquisitions. The study finds that size, relative size, and valuation differences could explain the higher returns for single acquirers, and that the positive relationship between toehold presence and acquiring firm returns results in less information asymmetry about the true value of the target firm, which leads to paying lower premiums.

Number of Pages in PDF File: 53

Keywords: Takeovers, Multiple, Relative size, Valuation

JEL Classification: G34

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