Empirical Evidence on the Value Effects Of Takeovers
Create Operating or Financial Synergy
Take over poorly managed firms and change management
Choosing a Target firm and valuing control/synergy
In Practice 26.1: A Status Quo Valuation of Digital
In Practice 26.3: Value of Control
The Post-Deal Performance of Merged Companies
Analyzing Management and Leveraged Buyouts
In Practice 26.7: Valuing A Leveraged Buyout: Congoleum Inc.
Valuing Acquisitions
References
Articles and books referenced in the chapter
Bhide, A., 1989, The Causes and Consequences of Hostile Takeovers, Journal of Applied Corporate Finance, v2, 36-59.
Bhide, A., 1993, Reversing Corporate Diversification, in The New Corporate Finance- Where Theory meets Practice, ed. D.H. Chew Jr., McGraw Hill.
Bradley, M., A. Desai and E.H. Kim, 1983, The Rationale behind Interfirm Tender Offers, Journal of Financial Economics, Vol 11, 183-206.
Bradley, M., A. Desai and E.H. Kim, 1988, Synergistic Gains from Corporate Acquisitions and their Division between the Stockholders of Target and Acquiring Firms, Journal of Financial Economics, Vol 21, 3-40.
Dann, L.Y. and H. DeAngelo, 1983, Standstill Agreements, Privately Negotiated Stock Repurchases, and the Market for Corporate Control, Journal of Financial Economics, Vol 11, 275-300.
Dann, L.Y. and H. DeAngelo, 1988, Corporate Financial Policy and Corporate Control: A study of Defensive Adjustments in Asset and Ownership Structure, Journal of Financial Economics, Vol 20, 87-128.
DeAngelo, H. and E.M. Rice, 1983, Antitakeover Charter Amendments and Stockholder Wealth, Journal of Financial Economics, Vol 11, 329-360.
DeAngelo, H., L. DeAngelo and E.M. Rice, 1984, Going Private: The Effects of a change in Corporate Ownership Structure, Midland Corporate Finance Journal, 35-43.
Deng, Z. and B. Lev, 1998, The Valuation of Acquired R&D, Working Paper, New York University.
Dubofsky, P. and P.R. Varadarajan, 1987, Diversification and Measures of Performance: Additional Empirical Evidence, Academy of Management Journal, 597-608.
Fruhan, W.E., W.C. Kester, S.P. Mason, T.R. Piper and R.S. Ruback, 1992, Congloeum, Case Problems in Finance, Irwin.
Healy, P.M., K.G. Palepu and R.S. Ruback, 1992, Does Corporate Performance improve after Mergers?, Journal of Financial Economics, v31, 135-176.
Hong, Hai, Robert S. Kaplan and Gershon Mandelker. Pooling Vs. Purchase: The Effects Of Accounting For Mergers On Stock Prices, The Accounting Review, 1978, v53(1), 31-47.
Jarrell, G.A., J.A. Brickley and J.M. Netter, 1988, The Market for Corporate Control: The Empirical Evidence since 1980, Journal of Economic Perspectives, Vol 2, 49-68.
Jensen, M.C. and R.S. Ruback, 1983, The Market for Corporate Control, Journal of Financial Economics, Vol 11, 5-50.
Kaplan, S. and M.S. Weisbach, 1992, The Success of Acquisitions: The Evidence from Divestitures, Journal of Finance, v47, 107-138.
Karpoff, J.M. and P.H. Malatesta, 1990, The Wealth Effects of Second-Generation State Takeover Legislation, Journal of Financial Economics, Vol 25, 291-322. KPMG, 1999, Unlocking Shareholder Value: The Keys to Success, KPMG Global Research Report.
Lewellen, W.G., 1971, A Pure Financial Rationale for the Conglomerate Merger, Journal of Finance, Vol 26, 521-537.
Lindenberg, E. and M.P. Ross, 1999, To Purchase or to Pool: Does it Matter?, Journal of Applied Corporate Finance, v 12, 32-47.
Linn, S. and J.J. McConnell, 1983, An Empirical Investigation of the Impact of Anti- Takeover Amendments on Common Stock Prices, Journal of Financial Economics, Vol 11, 361-399.
Michel, A. and I. Shaked, 1984, Does Business Diversification affect Performance?, Financial Management, Vvol 13, 5-14.
Mitchell, M.L. and K. Lehn, 1990, Do Bad Bidders make Good Targets?, Journal of Applied Corporate Finance, Vol 3, 60-69.
Myers, S.C. and N.S. Majluf, 1984, Corporate Financing and Investment Decisions when Firms have Information that Investors do not have, Journal of Financial Economics, Vol 13, 187-221.
Nail, L.A. , W.L. Megginson and C. Maquieira, 1998, Wealth Creation versus Wealth Redistributions in Pure Stock-for-Stock Mergers, Journal of Financial Economics, v48, 3- 33.
Parrino, J.D. and R.S. Harris, Takeovers, Management Replacement and Post-Acquisition Operating Performance: Some Evidence from the 1980s, Journal of Applied Corporate Finance, v11, 88-97.
Sirower, M.L., 1996, The Synergy Trap, Simon & Schuster. Stapleton, R.C., 1985, A Note on Default Risk, Leverage and the MM Theorem, Journal of Financial Economics, Vol 2, 377-381.
Varadarajan, P.R., and V. Ramanujam, 1987, Diversification and Performance: A Reexamination using a new two-dimensional conceptualization of diversity in firms, Academy of Management Journal, Vol 30, 369-380.
General References
For more studies on acquisitions:
Gaughan, P.A., 1999, Mergers, Acquisitions and Corporate Restructurings, John Wiley & Sons.
Weston, J.F., K.S. Chung and J.A. Siu, 1998, Takeovers, Restructuring and Corporate Governance, Simon and Schuster. For more on how a deal is put together:
Krallinger, J.C., 1997, Mergers and Acquisitions: Managing the Transaction, McGraw- Hill.
Related Websites
http://www.stern.nyu.edu/~adamodar/cfin2E/refs/online.htm
Prof. Aswath Damodaran
Valuing Acquisitions
When analyzing investment decisions, we did not consider in any detail the largest investment decisions that most firms make, i.e., their acquisitions of other firms. Boeing’s largest investment of the last decade was not a new commercial aircraft but its acquisition of McDonnell Douglas in 1996.
By Prof. Aswath Damodaran