Bidder Gains and Losses of Firms Involved in Many Acquisitions

Posted: 24 Nov 2006

See all articles by Antonios Antoniou

Antonios Antoniou

Wealth Associates

Huainan Zhao

Loughborough University - School of Business and Economics

Dimitris Petmezas

University of Surrey - Surrey Business School

Multiple version iconThere are 2 versions of this paper

Abstract

We examine shareholders' wealth effects (both in the short- and the long-run) of UK frequent bidders acquiring public, private, and/or subsidiary targets with alternative methods of payment between 1987 and 2004. We find that, in the short-run, bidders break even when acquiring public targets and gain significantly when buying private and subsidiary targets. This result is robust after controlling for relative size, bidder's book-to-market ratio, target origin, and industry diversification. Our long-run evidence, however, reveals that acquirers experience, significant wealth losses regardless of the target type acquired, indicating that markets may initially overreact to the acquisition announcement. As a result, we argue that contrary to Fuller et al. (2002) who suggest that acquiring private and subsidiary firms creates value for bidding firms, a reliable conclusion on bidders' shareholders wealth effects cannot be based solely on a short-run event study.

Keywords: mergers & acquisitions, frequent bidders, method of payment, public/private/subsidiary targets, short/long-term wealth effects

JEL Classification: G14, G34

Suggested Citation

Antoniou, Antonios and Zhao, Huainan and Petmezas, Dimitris, Bidder Gains and Losses of Firms Involved in Many Acquisitions. Journal of Business Finance and Accounting, Forthcoming; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=946884

Antonios Antoniou

Wealth Associates ( email )

Alpine House,
Honeypot Lane
London, NW9 9RX
United Kingdom

Huainan Zhao

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

Dimitris Petmezas (Contact Author)

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,217
PlumX Metrics