Acquirer's Return and the Choice of Acquisition Targets: Does Acquisition Experience Matter?
Posted: 4 May 2013 Last revised: 30 Mar 2019
Date Written: 2012
We study a sample of 6,503 UK acquisitions completed between 1985 and 2004 and control for previous deals similarities. Returns for frequent acquirers decrease constantly but they remain positive through high order deals. We do not detect an improving pattern of returns but, at best, a stable one when the deal is settled for cash. Using “characteristics-based” experience variables, our multivariate analysis show that the acquirers’ returns are unaffected by prior acquisition experience. However, we find solid evidence that acquirers draw inferences from prior experience in designing the method of payment, selecting the organizational form of the target firm and in engaging in focused acquisitions, which is consistent with learning through acquisitions. The results are robust to various consistency checks.
Keywords: Takeovers, frequent acquirers, learning, hubris, acquisition experience
JEL Classification: G34
Suggested Citation: Suggested Citation