Post-takeover Restructuring and the Sources of Gains in Foreign Takeovers: Evidence from U.S. Targets
We examine post-takeover restructuring activity and the sources of gains in large U.S. targets of foreign acquirers. We find that layoffs and sell-offs are less important in justifying the target premium in foreign takeovers than in domestic takeovers. In contrast, U.S. targets in foreign takeovers subsequently make more post-takeover investments than those in domestic takeovers. The likelihood of these post-takeover restructuring activities is significantly influenced by target characteristics. Finally, the U.S. Tax Reform Act of 1986 has had a significant positive effect on target returns. These results suggest that the realization of synergy is the main motive behind foreign takeovers.
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