M&A Rumors: Why Sellers Hate Them
42 Pages Posted: 6 Oct 2016
Date Written: October 5, 2016
We provide large sample evidence on the causes and consequences of takeover rumors. 55.2% of non-completed M&A deals involve rumors while only 17.3% of completed deals involve them. Probit-regressions reveal that rumors are deal-breakers, reducing the likelihood of deal completion by 37-41%. Simultaneous equations confirm this result even if rumors are not exogenous events but spread on purpose, e.g. in an attempt to prevent an M&A transaction, or if they are caused by unobservable effects. If a transactions still emerges even if rumored, then the rumor has destroyed $7.8 million of value of the median M&A deal.
Keywords: Takeovers, Private Equity, Rumors, Deal Completion
JEL Classification: G12, G14, G18, K22
Suggested Citation: Suggested Citation