Deal Size, Acquisition Premia and Shareholder Gains

Journal of Corporate Finance (Forthcoming)

36 Pages Posted: 11 Mar 2011 Last revised: 13 Nov 2012

See all articles by George Alexandridis

George Alexandridis

ICMA Centre, Henley Business School

Kathleen P. Fuller

University of Mississippi - School of Business Administration

Lars Terhaar

ICMA Centre, Henley Business School

Nickolaos G. Travlos

University of Surrey; ALBA Graduate Business School

Date Written: September 30, 2012

Abstract

This study examines the contradictory predictions regarding the association between the premium paid in acquisitions and deal size. We document a robust negative relation between offer premia and target size, indicating that acquirers tend to pay less for large firms, not more. We also find that the overpayment potential is lower in acquisitions of large targets. Yet, they still destroy more value for acquirers around deal announcements, implying that target size may proxy, among others, for the unobserved complexity inherent in large deals. We provide evidence in favor of this interpretation.

Keywords: Public Acquisitions, Target Size, Premium, Acquirer Returns

JEL Classification: G14, G30, G34

Suggested Citation

Alexandridis, George and Petrie Fuller, Kathleen and Terhaar, Lars and Travlos, Nickolaos G., Deal Size, Acquisition Premia and Shareholder Gains (September 30, 2012). Journal of Corporate Finance (Forthcoming). Available at SSRN: https://ssrn.com/abstract=1782930 or http://dx.doi.org/10.2139/ssrn.1782930

George Alexandridis (Contact Author)

ICMA Centre, Henley Business School ( email )

Whiteknights Campus
P.O. Box 242
Reading, RG6 6BA
United Kingdom
+44 (0) 118 378 4387 (Phone)

Kathleen Petrie Fuller

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

Lars Terhaar

ICMA Centre, Henley Business School ( email )

Whiteknights Campus
P.O. Box 242
Reading RG6 6BA
United Kingdom

Nickolaos G. Travlos

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

HOME PAGE: http://www.alba.edu.gr

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