Why Do Private Acquirers Pay so Little Compared to Public Acquirers?
Fisher College of Business Working Paper No. 2007-03-011
ECGI - Finance Working Paper No. 171/2007
Charles A. Dice Center Working Paper No. 2007-8
48 Pages Posted: 15 Apr 2007
There are 2 versions of this paper
Why Do Private Acquirers Pay so Little Compared to Public Acquirers?
Why Do Private Acquirers Pay so Little Compared to Public Acquirers?
Date Written: May 2007
Abstract
We find that the announcement gain to target shareholders from acquisitions is significantly lower if private firm instead of a public firm makes the acquisition. Non-operating firms like private equity funds make the majority of private bidder acquisitions. On average, target shareholders receive 55% more if a public firm instead of a private equity fund makes the acquisition. There is no evidence that the difference in premiums is driven by observable differences in targets. We find that target shareholder gains depend critically on the managerial ownership of the bidder. In particular, there is no difference in target shareholder gains between acquisitions made by public bidders with high managerial ownership and by private bidders. Such evidence suggests that the differences in managerial incentives between private and public firms have an important impact on target shareholder gains and that managers of firms with diffuse ownership may pay too much for acquisitions.
Keywords: Private equity acquisitions, target abnormal returns
JEL Classification: G3
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
New Evidence and Perspectives on Mergers
By Gregor Andrade, Mark L. Mitchell, ...
-
Do Managerial Objectives Drive Bad Acquisitions?
By Randall Morck, Andrei Shleifer, ...
-
Stock Market Driven Acquisitions
By Andrei Shleifer and Robert W. Vishny
-
Stock Market Driven Acquisitions
By Andrei Shleifer and Robert W. Vishny
-
Poison or Placebo? Evidence on the Deterrent and Wealth Effects of Modern Antitakeover Measures
By Robert Comment and G. William Schwert
-
Does Corporate Performance Improve after Mergers?
By Paul M. Healy, Krishna Palepu, ...
-
Managerial Performance, Tobin's Q, and the Gains from Successful Tender Offers
By Larry H.p. Lang, Ralph A. Walkling, ...