Financial Buyers in Takeovers: Focus on Cost Efficiency

23 Pages Posted: 3 Nov 2008

See all articles by Halina Frydman

Halina Frydman

New York University (NYU) - Department of Information, Operations, and Management Sciences

Roman Frydman

New York University (NYU) - Department of Economics

Susanne Trimbath

STP Advisory Services, LLC; Creighton University, Department of Finance and Economics; Bellevue University - College of Business

Multiple version iconThere are 3 versions of this paper

Date Written: January 2003

Abstract

This paper examines whether financial buyers are more likely to initiate takeovers ofinefficient firms. We show that they indeed are and thus conclude that takeovers byfinancial buyers play a potentially beneficial role in the allocation of corporate assets in the U.S. economy. Our analysis of determinants of takeovers initiated by financial buyers uses an application of the methodology developed in Trimbath, Frydman and Frydman (2001). In order to illustrate efficiency enhancements introduced by financial buyers, we select Forstmann and Little s acquisition of General Instrument for a brief case study. We show that their aggressive programs of cost management substantially improved theefficiency of General Instrument. Moreover, it allowed General Instrument to expandresearch and development to become the global leader in high definition television.

Keywords: Investment Banking, Corporate Finance and Governance, Mergers, Acquisitions, Econometric Methods

Suggested Citation

Frydman, Halina and Frydman, Roman and Trimbath, Susanne, Financial Buyers in Takeovers: Focus on Cost Efficiency (January 2003). Statistics Working Papers Series, Vol. , pp. -, 2003. Available at SSRN: https://ssrn.com/abstract=1293602

Halina Frydman (Contact Author)

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

44 West Fourth Street
New York, NY 10012
United States
212-998-0453 (Phone)

Roman Frydman

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

Susanne Trimbath

STP Advisory Services, LLC ( email )

PO Box 1252
Bellevue, NE 68005
United States
4029328888 (Phone)

HOME PAGE: http://www.STPAdvisors.com

Creighton University, Department of Finance and Economics ( email )

United States

Bellevue University - College of Business ( email )

United States

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