Do Acquisitions of Private Targets Create Higher Value?

46 Pages Posted: 2 Dec 2016

Date Written: November 30, 2016


Acquirers, on average, earn higher announcement-period returns when their targets are privately held than when their targets are publicly traded. We show that private targets have significantly more intangible assets than do public targets. We then develop a valuation model that is based on the fair values of the targets’ tangible and intangible assets and demonstrate that relative to public targets, private targets, while commanding higher premiums over their stand-alone values, also generate higher synergies in the acquisitions. However, the higher synergies in private target acquisitions are not the result of the target status but are driven by the larger amount of intangible assets acquired in those deals. We also find that the variance of synergies in private targets is much larger than that in acquisitions of public targets. Finally, our results are robust for known effects such as mode of payment and expected growth.

Keywords: Private Targets, Intangibles

JEL Classification: G14, G34, M41

Suggested Citation

Lys, Thomas Z. and Yehuda, Nir, Do Acquisitions of Private Targets Create Higher Value? (November 30, 2016). Available at SSRN: or

Thomas Z. Lys

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Department of Accounting & Information Systems
Evanston, IL 60208
United States
847-491-2673 (Phone)
847-467-1202 (Fax)

Nir Yehuda (Contact Author)

University of Delaware - Accounting & MIS ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

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