Takeover Motives During the Conglomerate Merger Wave
AbstractThis article examines the stock market response to acquisition announcements during and immediately after the conglomerate merger wave of the late 1960s. The main finding is that acquirer shareholders benefited from diversification acquisitions, which implies that diversification was not driven by managerial objectives. It is also shown that the market responded positively to bidders who retained the management of target companies and negatively to bidders who replaced target management. This is consistent with the hypothesis that the market favored acquisitions intended to exploit managerial synergies. It suggests that the market disliked takeovers that were motivated to discipline target management. Evidence on buyer and target price-earnings ratios is presented that is inconsistent with the conjecture that conglomerates were able to mislead investors by earnings-per-share manipulation.
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Bibliographic InfoPaper provided by Southern California - School of Business Administration in its series Papers with number 91-33.
Length: 32 pages
Date of creation: 1991
Date of revision:
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Postal: University of Southern California, School of BusinessAdministration, Los Angeles, CA 90089-1421.
Web page: http://www.marshall.usc.edu/
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mergers ; management;
Other versions of this item:
- John G. Matsusaka, 1993. "Takeover Motives during the Conglomerate Merger Wave," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 357-379, Autumn.
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