Do Acquisitions of Private Targets Create Higher Value? The Role of Intangible Assets Acquired
53 Pages Posted: 2 Nov 2012 Last revised: 1 Mar 2017
Date Written: June 1, 2015
Using a novel dataset that includes estimates of the fair value of the targets’ purchased tangible and intangible assets, we demonstrate that private targets have significantly more intangible assets than do public targets. We then develop a valuation model that is based on the fair values of the targets’ tangible and intangible assets and show that relative to public targets, private targets generate higher synergies in the acquisitions. However, the higher synergies in private target acquisitions are not the result of the target status but are driven by the larger amount of intangible assets acquired in those deals. We also find that the variance of synergies in private targets is much larger than that in acquisitions of public targets. Finally, our results are robust for known effects such as mode of payment and expected growth.
Keywords: mergers and acquisitions, synergies, premium
JEL Classification: G14, G34
Suggested Citation: Suggested Citation