Deal Size, Acquisition Premia and Shareholder Gains

نویسنده

  • G. Alexandridis
چکیده

Existing literature documents that large acquisitions destroy more value for acquiring shareholders than small acquisitions and attributes this to overpayment driven by managerial incentives and/or overconfidence. Nevertheless, the less intense competition, higher value at stake, lower managerial ownership and/or sizeable complexity of post-merger integration associated with large targets can result in lower acquisition premia. We examine these contradictory predictions and document a robust negative relation between target size and the premium paid in acquisitions. We also find that, despite the payment of lower premia, acquisitions of large targets destroy more value for acquirers and result in sharper increases in their return uncertainty around the deal announcement, implying that investors perceive these deals as more uncertain projects. Acquirers of large firms continue to underperform small target acquirers in the long-run in terms of both stock market and operating performance which indicates that they fail to deliver the assumed synergies. Our evidence suggests that large deals tend to be too big to succeed, irrespective of the premium paid.

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تاریخ انتشار 2011