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Deal size, acquisition premia and shareholder gains

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  • Alexandridis, George
  • Fuller, Kathleen P.
  • Terhaar, Lars
  • Travlos, Nickolaos G.

Abstract

This study examines the contradictory predictions regarding the association between the premium paid in acquisitions and deal size. We document a robust negative relation between offer premia and target size, indicating that acquirers tend to pay less for large firms, not more. We also find that the overpayment potential is lower in acquisitions of large targets. Yet, they still destroy more value for acquirers around deal announcements, implying that target size may proxy, among others, for the unobserved complexity inherent in large deals. We provide evidence in favor of this interpretation.

Suggested Citation

  • Alexandridis, George & Fuller, Kathleen P. & Terhaar, Lars & Travlos, Nickolaos G., 2013. "Deal size, acquisition premia and shareholder gains," Journal of Corporate Finance, Elsevier, vol. 20(C), pages 1-13.
    • Handle: RePEc:eee:corfin:v:20:y:2013:i:c:p:1-13
    DOI: 10.1016/j.jcorpfin.2012.10.006
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    More about this item

    Keywords

    Public acquisitions; Target size; Premium; Acquirer returns;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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