The Characteristics and Fate of Take Me Over Firms

41 Pages Posted: 15 Sep 2006 Last revised: 4 Oct 2008

Derek Oler

Texas Tech University - Rawls College of Business

Kevin R. Smith

Utah Valley University

Date Written: September 29, 2008

Abstract

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

Oler, Derek and Smith, Kevin R., The Characteristics and Fate of Take Me Over Firms (September 29, 2008). Available at SSRN: https://ssrn.com/abstract=930389 or http://dx.doi.org/10.2139/ssrn.930389

Derek Oler

Texas Tech University - Rawls College of Business ( email )

P.O. Box 42101
Lubbock, TX 79409
United States
806-834-2354 (Phone)
806-742-3182 (Fax)

Kevin R. Smith (Contact Author)

Utah Valley University ( email )

800 West University Parkway
Orem, UT 84058
United States

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