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This study uses detailed survey data from key decision makers in acquiring firms to test the impact of information availability in corporate acquisitions on pre-acquisition valuation and post-acquisition performance. Our results provide support for the hypothesis that information constraints at the time of target valuation are associated with greater overpayment and weaker post-acquisition performance. Prior ties between firms are found to reduce information constraints to acquiring managers, and thereby reduce overpayment and increase post-acquisition performance. Bids by other potential acquirers are found to signal their private information about the target, providing a substitute for lacking information. This effect holds particularly for non-financial data, which are harder to obtain. These findings suggest that overpayment and underperformance can be prevented not only when an acquirer possesses more information, but also when in the absence of needed information, the presence of rival bidders signals their private information about the value of the target.

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