We all have our favorites, from food to songs and so it is
with titles to academic articles.
Today’s post features one of my favorites, “Do Bad Bidders Become Good Targets?” The answer, in a very interesting article by
Mark Mitchell and Ken Lehn, is yes.
We’ve argued before that the best takeover defense is to not leave money on the table. The analysis of this article follows this
logic. Companies that lose money through
bad acquisitions are wasting shareholder value and are likely to be targets
themselves. The complete article can be
downloaded here. The abstract is shown below.
“Do Bad Bidders Become Good Targets?”
by Mark Mitchell and
Ken Lehn
This paper empirically examines one motive for takeovers: to change control of firms that make acquisitions that diminish the value of their equity. Firms that subsequently become takeover targets make acquisitions that significantly reduce their equity value, and firms that do not become takeover targets make acquisitions that raise their equity value. Within the sample of acquisitions by targets, the acquisitions that reduce equity value the most are those that are later divested either in bust-up takeovers or restructuring programs to thwart the takeover. This evidence is consistent with theories advanced by Robin Marris (1963), Henry G. Manne (1965), and Michael C. Jensen (1986) concerning the disciplinary role played by takeovers.
All the best,
Ralph
No comments:
Post a Comment