Target Firm-Specific Information and Acquisition Efficiency
Washington University in Saint Louis - Olin School of Business
New York University (NYU) - Leonard N. Stern School of Business
September 2, 2015
Management Science, Forthcoming
This study investigates whether firm-specific information about targets improves acquisition efficiency. We define acquisition efficiency as the total surplus generated by an acquisition (Vickrey 1961; Milgrom 1989) and measure it as the difference in the value of the merged firm and the sum of the two firms operating separately. We find a positive association between target firm-specific information and acquisition efficiency that is driven mainly by diversifying acquisitions. Additional evidence suggests that both the likelihood of the withdrawal of an announced acquisition and the likelihood of a future divestiture of a target decrease with target firm-specific information. Taken together, our findings suggest that the availability of this information improves merger and acquisitions efficiency.
Number of Pages in PDF File: 51
Date posted: December 5, 2009 ; Last revised: September 21, 2015