Who Gains from Buying Bad Bidders?

59 Pages Posted: 2 Dec 2009 Last revised: 26 Feb 2016

David Offenberg

Loyola Marymount University - Department of Finance

Miroslava Straska

Virginia Commonwealth University (VCU) - School of Business

H. Gregory Waller

Virginia Commonwealth University School of Business

Date Written: April 1, 2014

Abstract

We study the value gains from takeovers of firms with poor acquisition histories. We document that the premium received by target shareholders is higher when the value loss from the targets’ prior acquisitions is larger. However, the gains to target shareholders seem to be offset by losses to acquiring shareholders. The average announcement return to acquiring shareholders is negative and decreasing in the value loss from the targets’ prior acquisitions. Additionally, the combined acquirer-target value created in these takeovers is insignificant. These results suggest that the value lost from targets’ prior acquisitions is not recovered through changes in corporate control.

Keywords: mergers and acquisitions, market for corporate control, agency theory, corporate governance, shareholder wealth

JEL Classification: G00, G3, G30, G34, L00, L2, L20

Suggested Citation

Offenberg, David and Straska, Miroslava and Waller, H. Gregory, Who Gains from Buying Bad Bidders? (April 1, 2014). Journal of Financial and Quantitative Analysis (JFQA), Volume 49, Issue 2, April 2014. Available at SSRN: https://ssrn.com/abstract=1516096 or http://dx.doi.org/10.2139/ssrn.1516096

David Offenberg (Contact Author)

Loyola Marymount University - Department of Finance ( email )

1 LMU Dr.
MS 8385
Los Angeles, CA 90045
United States

HOME PAGE: http://cba.lmu.edu/faculty?expert=david.offenbergphd

Miroslava Straska

Virginia Commonwealth University (VCU) - School of Business ( email )

Richmond, VA 23284-4000
United States

H. Gregory Waller

Virginia Commonwealth University School of Business ( email )

Richmond, VA 23226
United States

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