What Drives Acquisition Premiums and Why do Targets Reject Offers? Evidence from Failed Acquisition Offers

47 Pages Posted: 10 Aug 2021

See all articles by David Aboody

David Aboody

University of California, Los Angeles (UCLA) - Accounting Area

Omri Even-Tov

Haas School of Business - UC Berkeley

Jean Zeng

NUS Business School, National University of Singapore

Date Written: June 30, 2021

Abstract

Using a hand-collected sample of 1,246 failed acquisition offers from 1979 to 2016, we investigate whether acquisition premiums are driven by the market’s revaluation of the target (the information hypothesis) or potential synergies (the synergy hypothesis). Partitioning the sample into acquisition offers that fail due to the target’s rejection (rejection group) and those that fail due to other reasons (non-rejection group), we find that the information hypothesis applies to both groups, reversing the interpretation of prior studies. Overall, our paper shows that identifying the failure reason is of prominent importance for research in mergers and acquisitions.

Keywords: Mergers and acquisitions, Failed acquisitions, Corporate governance

JEL Classification: G34

Suggested Citation

Aboody, David and Even-Tov, Omri and Zeng, Jean, What Drives Acquisition Premiums and Why do Targets Reject Offers? Evidence from Failed Acquisition Offers (June 30, 2021). Available at SSRN: https://ssrn.com/abstract=3877384 or http://dx.doi.org/10.2139/ssrn.3877384

David Aboody

University of California, Los Angeles (UCLA) - Accounting Area ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-825-3393 (Phone)
310-267-2193 (Fax)

Omri Even-Tov (Contact Author)

Haas School of Business - UC Berkeley ( email )

Haas School of Business
Berkeley, CA 94720
United States
3104302236 (Phone)

Jean Zeng

NUS Business School, National University of Singapore ( email )

15 Ken Ridge Drive
NUS Business School
Singapore, 129788

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