Measuring Deal Premiums in Takeovers

Mulherin, J. Harold; Şimşir, Şerif Aziz

doi:10.1111/fima.12053

Cited by 54 publications

(13 citation statements)

References 13 publications

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“…If a target receives several bids, only the first is considered to minimize confounding events. Here, we used SDC's “original date announced,” which is the very first bid in a possible sequence and the most reliable date for premium measures (Mulherin and Simsir, ). All acquisitions with the same immediate or ultimate parent are eliminated (e.g., internal reorganization).…”

Section: Data and Variablesmentioning

confidence: 99%

Sold Below Value? Why Takeover Offers Can Have Negative Premiums

Weitzel

Kling

2017

Financial Management

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Many studies have acknowledged the existence of negative offer premiums where the initial bid undercuts the target's preannouncement market price. However, this phenomenon has not been explained. Negative premiums occur frequently and are no measurement error. We demonstrate theoretically and empirically that “hidden earnouts,” where target shareholders participate in the bidder's share of joint synergies, and corrections of overvaluation explain negative premiums. We find that target shareholders profit from the consummation of a takeover even if the announced offer has a negative premium. Our theory generalizes to low positive premiums with predictive power for the bottom 25% of all premiums.

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Section: Data and Variablesmentioning

confidence: 99%

Sold Below Value? Why Takeover Offers Can Have Negative Premiums

Weitzel

Kling

2017

Financial Management

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“…Third, stock prices might incorporate M&A related news prior to announcement date if there are information leakages in emerging-market countries or if investors anticipate deals prior to announcement ( Malatesta and Thompson, 1985;Brunnermeier, 2005;Cornett et al, 2011;Cai et al, 2011 announcement dates may also affect the results. Mulherin and Simsir (2015) and Arslan and Simsir (2016) document abnormal price movements before SDC announcement dates due to merger-related events (such as merger rumors or search-for buyer announcements) in 24% of US deals and 74% of Turkish deals, respectively. We investigate whether M&A related news might be released and reflected in stock prices before the announcement by analyzing abnormal returns in the 90 trading days prior to SDC announcement dates.…”

Section: Cross-country Differences In Bidder and Target Carsmentioning

confidence: 99%

Global Merger and Acquisition (M&A) activity: 1992–2011

Yılmaz

Tanyeri

2016

Finance Research Letters

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In our global sample of 263,461 deals in 47 countries, 3-day target cumulative abnormal returns (CARs) average 6.9% and bidder CARs average 1.4%. When we impose the common filters used in the literature which restrict the sample to completed acquisitions of public firms, target CARs increase from 6.9% to 13%. Our findings indicate that M&A activity (particularly in deals where control rights are sold) generates value. We also find that the magnitudes of bidder and target CARs in developed countries are higher than those in emerging-market countries.

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“…Given that the differences in announcement returns are not always significant, and the difficulty in identifying when the market became aware of the acquisition (Mulherin and Simsir, 2015), we are cautious in interpreting these results as showing increased Takeover Defenses improves managerial bargaining power in this setting. However, we note that none of the results are consistent with the notion that increasing Takeover Defenses harms shareholders conditioned on being acquired.…”

Section: Takeover Premiummentioning

confidence: 99%

“…Repeating our tests using individual provisions and groups as a whole for the other three categories confirmed that firms do not significantly alter any of these provisions after the adoption of the IDD.22 We use the announcement date correction methodology described inMulherin and Simsir (2015).…”

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confidence: 95%