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Bidder earnings forecasts in mergers and acquisitions

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  • Amel-Zadeh, Amir
  • Meeks, Geoff

Abstract

This study finds that pro-forma earnings forecasts by bidding firms during acquisitions are associated with a higher likelihood of deal completion, expedited deal closing, and with a lower acquisition premium − but only in stock-financed acquisitions. Analysts also respond to these forecasts by revising their forecasts for the bidder upward. However, the benefits of forecast disclosure only accrue to bidders with a strong forecasting reputation prior to the acquisition. Explaining why not all bidders forecast, we document a higher likelihood of post-merger litigation and CEO turnover for bidders with a weak forecasting reputation and for those that underperform post-merger.

Suggested Citation

  • Amel-Zadeh, Amir & Meeks, Geoff, 2019. "Bidder earnings forecasts in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 373-392.
    • Handle: RePEc:eee:corfin:v:58:y:2019:i:c:p:373-392
    DOI: 10.1016/j.jcorpfin.2019.06.002
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    6. Deepak Kumar & Keya Sengupta & Mousumi Bhattacharya, 2023. "M&A Negotiations: Role of Negotiation Process, Ownership and Advisors on Deal Completion," Group Decision and Negotiation, Springer, vol. 32(5), pages 1083-1115, October.

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