Bidder Gains and Losses of Firms Involved in Many Acquisitions

24 Pages Posted: 15 Oct 2007

See all articles by Antonios Antoniou

Antonios Antoniou

Wealth Associates

Dimitris Petmezas

University of Surrey - Surrey Business School

Huainan Zhao

Loughborough University - School of Business and Economics

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Abstract

We examine shareholders' wealth effects (both in the short- and the long-run) of UK frequent bidders acquiring public, private, and/or subsidiary targets with alternative methods of payment between 1987 and 2004. We find that, in the short-run, bidders break even when acquiring public targets and gain significantly when buying private and subsidiary targets. This result is robust after controlling for relative size, bidder's book-to-market ratio, target origin, and industry diversification. Our long-run evidence, however, reveals that acquirers experience, significant wealth losses regardless of the target type acquired, indicating that markets may initially overreact to the acquisition announcement. As a result, we argue that contrary to Fuller et al. (2002) who suggest that acquiring private and subsidiary firms creates value for bidding firms, a reliable conclusion on bidders' shareholders wealth effects cannot be based solely on a short-run event study.

Suggested Citation

Antoniou, Antonios and Petmezas, Dimitris and Zhao, Huainan, Bidder Gains and Losses of Firms Involved in Many Acquisitions. Journal of Business Finance & Accounting, Vol. 34, Issue 7-8, pp. 1221-1244, September/October 2007. Available at SSRN: https://ssrn.com/abstract=1020803 or http://dx.doi.org/10.1111/j.1468-5957.2007.02012.x

Antonios Antoniou (Contact Author)

Wealth Associates ( email )

Alpine House,
Honeypot Lane
London, NW9 9RX
United Kingdom

Dimitris Petmezas

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

Huainan Zhao

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

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