The Differences between Hostile & Friendly Takeovers

National Bureau of Economic Research Conference Volume, University of Chicago Press, 1988

University of Alberta School of Business Research Paper No. 2013-637

Posted: 15 Feb 2014

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: January 7, 1987

Abstract

Compared to an average Fortune 500 firm, a target of a hostile takeover is smaller, older, has a lower Tobin's Q, invests less of its income, and is growing more slowly. The low Q seems to be an industry-specific rather than a firm-specific effect. In addition, a hostile target is less likely to be run by a member of the founding family, and has lower officer ownership, than the average firm. In contrast, a target of a friendly acquisitions is smaller and younger than an average Fortune 500 firm, and has comparable Tobin's Qs and most other financial characteristics. Friendly targets are more likely to be run by a member of the founding family, and have higher officer ownership, than the average firm. The decision of a CEO with a large stake and/or with a relationship to a founder to retire often precipitates a friendly acquisition. These results suggest that the motive for a takeover often determines its mood. Thus disciplinary takeovers are more often hostile, and synergistic ones are more often friendly.

Suggested Citation

Morck, Randall K. and Shleifer, Andrei and Vishny, Robert W., The Differences between Hostile & Friendly Takeovers (January 7, 1987). National Bureau of Economic Research Conference Volume, University of Chicago Press, 1988; University of Alberta School of Business Research Paper No. 2013-637. Available at SSRN: https://ssrn.com/abstract=2276201

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

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Andrei Shleifer

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European Corporate Governance Institute (ECGI)

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Robert W. Vishny

University of Chicago - Booth School of Business ( email )

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