Bidder Earnings Forecasts in Mergers and Acquisitions

54 Pages Posted: 10 Jan 2013 Last revised: 13 Jun 2019

See all articles by Amir Amel-Zadeh

Amir Amel-Zadeh

University of Oxford - Said Business School

Geoff Meeks

University of Cambridge - Judge Business School

Date Written: June 8, 2019

Abstract

This study finds that pro-forma earnings forecasts by bidding firms during acquisitions are associated with a higher likelihood of deal completion, expedited deal closing, and with a lower acquisition premium − but only in stock-financed acquisitions. Analysts also respond to these forecasts by revising their forecasts for the bidder upward. However, the benefits of forecast disclosure only accrue to bidders with a strong forecasting reputation prior to the acquisition. Explaining why not all bidders forecast, we document a higher likelihood of post-merger litigation and CEO turnover for bidders with a weak forecasting reputation and for those that underperform post-merger.

Keywords: management earnings forecasts, mergers, acquisitions, voluntary disclosures, merger forecasts, earnings per share, accretion, dilution

JEL Classification: D82, G14, G34, M41

Suggested Citation

Amel-Zadeh, Amir and Meeks, Geoff, Bidder Earnings Forecasts in Mergers and Acquisitions (June 8, 2019). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2198958 or http://dx.doi.org/10.2139/ssrn.2198958

Amir Amel-Zadeh (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Geoff Meeks

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0) 1223 764226 (Phone)
+44 (0) 1223 339701 (Fax)

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