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Why do private acquirers pay so little compared to public acquirers?

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  • Bargeron, Leonce L.
  • Schlingemann, Frederik P.
  • Stulz, René M.
  • Zutter, Chad J.

Abstract

Using the longest event window, we find that public target shareholders receive a 63% (14%) higher premium when the acquirer is a public firm rather than a private equity firm (private operating firm). The premium difference holds with the usual controls for deal and target characteristics, and it is highest (lowest) when acquisitions by private bidders are compared to acquisitions by public companies with low (high) managerial ownership. Further, the premium paid by public bidders (not private bidders) increases with target managerial and institutional ownership.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 89 (2008)
Issue (Month): 3 (September)
Pages: 375-390

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Handle: RePEc:eee:jfinec:v:89:y:2008:i:3:p:375-390

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Web page: http://www.elsevier.com/locate/inca/505576

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Keywords: Private equity acquisitions Target abnormal returns;

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References

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Citations

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Cited by:
  1. Belot, François, . "Do target shareholder agreements induce bidders to pay higher premiums?," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/2941, Université Paris-Dauphine.
  2. Bargeron, Leonce L. & Schlingemann, Frederik P. & Stulz, Rene M. & Zutter, Chad J., 2009. "Do Target CEOs Sell Out Their Shareholders to Keep Their Job in a Merger?," Working Paper Series 2009-2, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  3. Russell Pittman, 2007. "Consumer Surplus as the Appropriate Standard for Antitrust Enforcement," EAG Discussions Papers 200709, Department of Justice, Antitrust Division.
  4. Paige Ouimet & Rebecca Zarutskie, 2011. "Acquiring Labor," Working Papers 11-32, Center for Economic Studies, U.S. Census Bureau.
  5. Hege, Ulrich & Lovo, Stefano & Slovin, Myron B. & Sushka, Marie E., 2009. "Asset sales and the role of buyers: strategic buyers versus private equity," MPRA Paper 39549, University Library of Munich, Germany, revised Feb 2012.
  6. Betton, Sandra & Eckbo, B. Espen & Thorburn, Karin S., 2009. "Merger negotiations and the toehold puzzle," Journal of Financial Economics, Elsevier, vol. 91(2), pages 158-178, February.
  7. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
  8. Eckbo, B. Espen, 2009. "Bidding strategies and takeover premiums: A review," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 149-178, February.
  9. Utz Weitzel & Killian J McCarthy, 2009. "Theory and Evidence on Mergers and Acquisitions by Small and Medium Enterprises," Working Papers 09-21, Utrecht School of Economics.
  10. Bauguess, Scott W. & Moeller, Sara B. & Schlingemann, Frederik P. & Zutter, Chad J., 2009. "Ownership structure and target returns," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 48-65, February.
  11. Steven N. Kaplan & Per Strömberg, 2008. "Leveraged Buyouts and Private Equity," NBER Working Papers 14207, National Bureau of Economic Research, Inc.
  12. Achleitner, Ann-Kristin & Braun, Reiner & Engel, Nico, 2011. "Value creation and pricing in buyouts: Empirical evidence from Europe and North America," Review of Financial Economics, Elsevier, vol. 20(4), pages 146-161.
  13. Bernile, Gennaro & Jarrell, Gregg A., 2009. "The impact of the options backdating scandal on shareholders," Journal of Accounting and Economics, Elsevier, vol. 47(1-2), pages 2-26, March.
  14. Officer, Micah S. & Ozbas, Oguzhan & Sensoy, Berk A., 2010. "Club deals in leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 98(2), pages 214-240, November.
  15. Phillip Leslie & Paul Oyer, 2008. "Managerial Incentives and Value Creation: Evidence from Private Equity," NBER Working Papers 14331, National Bureau of Economic Research, Inc.
  16. Tomas Mantecon & Paul Thistle, 2011. "The IPO market as a screening device and the going public decision: evidence from acquisitions of privately and publicly held firms," Review of Quantitative Finance and Accounting, Springer, vol. 37(3), pages 325-361, October.
  17. Billett, Matthew T. & Jiang, Zhan & Lie, Erik, 2010. "The effect of change-in-control covenants on takeovers: Evidence from leveraged buyouts," Journal of Corporate Finance, Elsevier, vol. 16(1), pages 1-15, February.
  18. Fich, Eliezer M. & Cai, Jie & Tran, Anh L., 2011. "Stock option grants to target CEOs during private merger negotiations," Journal of Financial Economics, Elsevier, vol. 101(2), pages 413-430, August.
  19. Weitzel, Utz & Kling, Gerhard, 2012. "Sold below value? Why some targets accept very low and even negative takeover premiums," MPRA Paper 42832, University Library of Munich, Germany.
  20. Uysal, Vahap B., 2011. "Deviation from the target capital structure and acquisition choices," Journal of Financial Economics, Elsevier, vol. 102(3), pages 602-620.

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