Beyond the Target: M&A Decisions and Rival Ownership
45 Pages Posted: 18 Aug 2018 Last revised: 5 Aug 2019
Date Written: June 13, 2019
Diversified acquirer shareholders can profit from value-destroying acquisitions not only through their target stakes, but also through their stakes in non-merging rival firms. We find that announcement losses are largely mitigated for the average acquirer shareholders when accounting for wealth effects on their rival stakes. As rival ownership increases, deal synergies required to merge become lower. These results help explain why value-destroying acquisitions might not get blocked by acquirer shareholders and why a high common ownership environment is correlated with higher M&A frequency.
Keywords: Common Ownership, Mergers and Acquisitions, Synergies, Institutional Investors
JEL Classification: G23, G30, G34
Suggested Citation: Suggested Citation