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Fire sale acquisitions: Myth vs. reality

  • Ang, James
  • Mauck, Nathan

We provide empirical evidence on the conjecture that in economic crises, firms could be forced to sell at deep discounts, or fire sale prices. Using the conventional stock price near the announcement date, we find instead distressed firms in crisis periods receive a 30% higher offer premium than distressed firms in normal periods; they also receive a 34% higher premium than non-distressed firms in crisis periods. Acquirers also do not gain, at announcement and over the long-term. Acquirers, however, may perceive they realize fire sale discounts if the reference is the targets' highest price in the previous 52Â weeks.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 3 (March)
Pages: 532-543

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:3:p:532-543
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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