In a competitive market for takeover bids, the takeover premium serves as an effective proxy for the expected synergy. We find that the expected synergy is primarily related to the premiums paid in other recent takeovers in the same industry. This relation is even stronger when considering previous takeovers (especially over the previous three-month horizon) in the same industry that have the same payment method (cash versus stock) or form of takeover (tender offer versus merger). More of the variation in expected synergies among takeovers can be explained by the premiums derived from recent takeovers in the same industry than by all bidder- and target-specific characteristics combined. We also find that the bidder valuation effects are inversely related to the premium paid for targets, implying that abnormally high premiums may reflect overpayment rather than abnormally high synergies. (c) 2008 The Southern Finance Association and the Southwestern Finance Association.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by Southern Finance Association and Southwestern Finance Association in its journal Journal of Financial Research.