The Characteristics and Fate of Take Me Over Firms
41 Pages Posted: 15 Sep 2006 Last revised: 4 Oct 2008
Date Written: September 29, 2008
We investigate 400 firms that publicly advertise a desire to be acquired ("take-me-over" or TMO firms) from 1990 to 2006. Over this period the TMO "wave" lags about one year behind the acquisition wave. Most TMO firms show evidence of high debt levels as well as fundamental underperformance relative to industry peers. The TMO announcement significantly increases the odds of receiving a subsequent takeover offer. On average, TMO firms enjoy positive abnormal returns over the five days surrounding their announcement; however, average abnormal returns over the year following their announcement are significantly negative, suggesting that the TMO announcement signals bad news that is not fully anticipated by the market.
Keywords: Mergers, Acquisitions, Bankruptcy
JEL Classification: M41, G33, G34, D82
Suggested Citation: Suggested Citation