M&A Rumors: Why Sellers Hate Them

42 Pages Posted: 6 Oct 2016

See all articles by Yan Alperovych

Yan Alperovych

EMLYON Business School; EMLYON Business School - Research Centre for Entrepreneurial Finance

Douglas J. Cumming

Florida Atlantic University

Alexander Peter Groh

EMLYON Research Centre for Entrepreneurial Finance; EMLYON Business School

Date Written: October 5, 2016

Abstract

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

Alperovych, Yan and Cumming, Douglas J. and Groh, Alexander Peter, M&A Rumors: Why Sellers Hate Them (October 5, 2016). Available at SSRN: https://ssrn.com/abstract=2848303 or http://dx.doi.org/10.2139/ssrn.2848303

Yan Alperovych

EMLYON Business School ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

EMLYON Business School - Research Centre for Entrepreneurial Finance ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Alexander Peter Groh (Contact Author)

EMLYON Research Centre for Entrepreneurial Finance ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

EMLYON Business School ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

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