Product market conditions and the decision to acquire private versus public targets

53 Pages Posted: 26 Sep 2024

See all articles by Siti Farida

Siti Farida

University of Birmingham - Birmingham Business School

Jana P. Fidrmuc

Warwick Business School - Finance Group

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Date Written: August 27, 2024

Abstract

We examine how product market competition and predation risk impact a firm's decision to acquire a public versus a private target. We hypothesize that competitive pressures and predation risk impact a firm's risk tolerance and strategic objectives and, therefore, its inclination for a public or private target acquisition. We show that public target acquisitions are more likely than private target acquisitions in more competitive product markets and among firms with higher predation risk. In addition, firms that are industry leaders are more likely to acquire public than private targets. Altogether we find that firms facing higher competitive risks are more careful in increasing their business risk further. They are more likely to opt for public target acquisitions, which add less business risk and help to consolidate acquiring firm's position in the industry by increasing market share, scope, and improving cost efficiency after the takeover.

Keywords: Mergers and acquisitions, public and private target, product market conditions, acquisition outcomes.

JEL Classification: G34, L22, L25, O32

Suggested Citation

Farida, Siti and Fidrmuc, Jana P. and Roosenboom, Peter, Product market conditions and the decision to acquire private versus public targets (August 27, 2024). Available at SSRN: https://ssrn.com/abstract=4938725 or http://dx.doi.org/10.2139/ssrn.4938725

Siti Farida (Contact Author)

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

Jana P. Fidrmuc

Warwick Business School - Finance Group ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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