The Wealth Effects of Horizontal Acquisitions on Rivals: Distinguishing between Public, Private and Subsidiary Targets

33 Pages Posted: 31 Aug 2012

See all articles by Virginie Mataigne

Virginie Mataigne

Ghent University-Universiteit Gent - Department of Accountancy and Corporate Finance

Sophie Manigart

Vlerick Business School; Ghent University

Mathieu Luypaert

Vlerick Business School

Date Written: August 27, 2012

Abstract

This study investigates the wealth effects of 182 European horizontal acquisitions in the manufacturing industry on rivals of the merging firms, thereby distinguishing between acquisitions of public, private and subsidiary targets. Based on a case-by-case investigation of the European Commission over 800 publicly-listed rivals were indentified. The event study indicates that rivals gain significant positive abnormal returns when a private firm is acquired and zero abnormal returns when a subsidiary or public firm is acquired. We hence contribute to the acquisition literature by highlighting that acquisitions of private and subsidiary targets, which until now have been treated as a single category, have different effect on rival returns. Furthermore, we argue that motives for acquiring a private, public or subsidiary target are highly distinct and consequently affect rival firms differently. Acquirers of publicly-traded firms are prone to agency risks and hubris, while acquirers of subsidiary targets are buying poorly performing lines of business.

Keywords: M&A, rivals, valuation

JEL Classification: G34, L4, L2

Suggested Citation

Mataigne, Virginie and Manigart, Sophie and Luypaert, Mathieu, The Wealth Effects of Horizontal Acquisitions on Rivals: Distinguishing between Public, Private and Subsidiary Targets (August 27, 2012). Midwest Finance Association 2013 Annual Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2136828 or http://dx.doi.org/10.2139/ssrn.2136828

Virginie Mataigne (Contact Author)

Ghent University-Universiteit Gent - Department of Accountancy and Corporate Finance ( email )

Bedrijfsfinanciering (RUG)
Kuiperskaai 55 E
Ghent, B-9000
Belgium

Sophie Manigart

Vlerick Business School ( email )

Reep 1
Ghent, BE-9000
Belgium

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

Mathieu Luypaert

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

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