Tapping into financial synergies: Alleviating financial constraints through acquisitions

This paper examines whether firms are able to use acquisitions ease their financial constraints. The results show that do financing constraints for constrained acquirers. Relative unconstrained acquirers, financially more likely undervalued equity fund and target liquid firms. Using a propensity score matched sample in difference-in-difference framework, the acquirers become less post-acquisition relative non-acquiring improvement is pronounced diversifying acquire rather than issue retain proceeds. Following acquisition, raise debt, increase investments, reduce cash holdings non-acquirers, consistent with experiencing reductions These improvements not seen Finally, familiar diversification discount non-existent