Deal Size, Acquisition Premia and Shareholder Gains

Alexandridis, George; Fuller, Kathleen P.; Terhaar, Lars; Travlos, Nickolaos G.

doi:10.2139/ssrn.1782930

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

Kathleen P. Fuller

University of Mississippi - School of Business Administration

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: 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